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Cautious welcome for motoring measures in Budget

Surprise tax and duty measures backed but many issues to address.
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30 October 2024

The fleet and leasing industry has given a cautious welcome to Chancellor of the Exchequer Rachel Reeves’s first Budget Statement on 30th October, though there was less to cheer the automotive retail sector.

Measures announced by the Chancellor included maintaining advantages for electric vehicle drivers in benefit-in-kind tax rates until 2030, and a surprise commitment to retain the 5p cut in fuel duty introduced by the previous administration and to freeze rates for at least another year.

Paul Hollick, chair of the Association of Fleet Professionals (AFP), welcomed the announcement on company car tax rates, which he said the AFP had been campaigning for over an extended period. “With the massive swing towards electric cars seen in the fleet sector in recent years, there was perhaps an expectation that we would start to see benefit-in-kind begin to creep upwards and these figures are probably at the lower end of our expectations,” Hollick said.

“This new certainty around tax will, in our opinion, maintain the ongoing electrification of car fleets, especially in establishing a marked differential compared to hybrids. Similarly, the increased differential in first-year tax rates for electric cars is to be welcomed although, being a one-off cost, will have a much more limited impact.”

The ongoing freeze in fuel duty and the Government deciding not to implement a widely predicted scrapping of the 5p discount surprised many across the industry. “Petrol and diesel prices are historically quite low but this remains good news for fleets who are working hard to keep their spending under control,” Hollick said.

Peter Golding, managing director of fleet software specialist FleetCheck, also welcomed both the company car tax and fuel duty measures. “While it does bring some bring additional tax, the decision on company tax is welcome in that it should help to maintain impetus behind the whole electrification project,” Golding said.

“Also, while petrol and diesel pump prices are at a lower level than they have been for some time, there seems to be a recognition from government that both business and individuals need further protection. Both moves are very welcome.”

Long term hope for fleets

Golding added that the Government’s argument that the Budget was about growth is obviously a long-term project but, if effective, would be very much good news for fleets. “There has largely been a sense of inertia about the UK economy in the post-pandemic period and if the chancellor can restore a feeling of at least some dynamism during this parliament, that would be no small achievement.”

Paul Burgess, CEO of Startline Motor Finance, said that the Budget finally happening ended a long period of drift since the election and some sense that both businesses and consumers have been delaying expenditure until they knew exactly what the Budget would contain.

“While Labour has taken some care to protect what it loosely terms ‘working people’ – including the surprise ongoing freeze in fuel duty – there are moves here that will unavoidably have an impact on how much people have to spend, and it’ll be interesting to see whether all of this affects the used car market in a positive or negative manner during the next few weeks and months,” Burgess added.

“However, the biggest share of the higher tax burden is going to fall on businesses, with the increase in employers National Insurance likely to prove especially expensive. The Chancellor would no doubt argue that such costs will be offset over time by Labour’s drive for economic growth, but the OBR (Office for Budget Responsibility) forecasts are no better than middling and only time will tell whether that strategy is effective.”

‘Tough time to sell cars’

James Tew, CEO at automotive retail technology specialist iVendi, argued that the importance of the Budget had been largely overtaken by the court of appeal announcement on discretionary commission arrangements (story here).

“New and used car and van sales are largely dependent on the motor finance sector working efficiently, and that decision has caused much consternation – this means what we really need right now from the government is greater clarity around how the situation will be resolved,” Tew said.

“Against this backdrop, the additional costs that are being placed on our businesses in the Budget look more onerous than they would’ve just a few days ago. Moves such as increasing NI on employer contributions will be taking effect just at a point in time when there is a strong wave of uncertainty passing through our sector. Added to ongoing difficulties around electrification, it is clear that this is a potentially difficult moment to be selling vehicles.”

Hollick added a note of warning that while there had been “a potentially promising start for this government and its policy towards fleets,” many issues need resolving in the short to medium term. For example there was no mention in the Chancellor’s speech regarding the Zero-Emissions Vehicle Mandate and the difficulties it is causing to the UK retail market, or the problems with the status of 4.25-tonne electric vans. “Conversations covering at least some of these problems are underway and we await their outcome with interest,” Hollick said.

John Cassidy, managing director of sales at Close Brothers Motor Finance, added his voice to calls for the Government to do more to stimulate the switch to EV ownership; “Whilst the (fuel duty) freeze will ease some pressure on motorists’ wallets, the Government will have an eye on the horizon and its planned 2030 ban on the sale of new petrol and diesel cars.

“It’s vital that in facilitating this transition, the Government uses carrots as well as sticks and commits to strong investment in charging infrastructure. By doing this, there will be fewer challenges of electric vehicle ownership, and more consumers are given the option to move away from internal combustion engines.”

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Andrew Charman

Andrew Charman has been a motoring journalist for more than 30 years, writing about vehicles, technology and the industry. He is a Guild of Motoring Writers committee member and has won several awards including for his business coverage.

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