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FLEET ORGANISATIONS' 2011 VIEW: Government dialogue tops ACFO agenda

Date: 11 January 2011

Julie Jenner, ACFO, Chairman

The establishing of a close working relationship with the ministers of the coalition Government, in order to help deliver long-term planning stability for fleets, is ACFO's New Year goal, writes chairman Julie Jenner

ACFO has, over many years, enjoyed a dialogue with ministers and civil servants in a number of Whitehall departments, including HM Treasury and the Department for Transport.

But following the May general election and the coalition Government's emergency Budget in June, and its decision to axe the traditional December Pre-Budget Report, direct talks with ministers remains a key aspiration for the organisation.

While ACFO's leaders continue to discuss issues with civil servants, I hope that in the run-up to the 2011 Budget on Wednesday 23 March, the organisation will hold face-to-face discussions with ministers on a number of key issues, including:

. advisory fuel rates

. Company car tax rates for 2013/14 and beyond

. Guidance on long-term plans for all motoring tax rates.

New AFRs came into effect on 1 December 2010. However, with pump prices at the time close to record levels and this year's VAT rise to 20%, the majority of rates only increased by 1p a mile, while some remained unchanged and the rate for diesel cars with engine sizes over 2.0 litres was cut by 1p. Yet, according to the AA, petrol is close to 12p a litre more expensive than 12 months ago and diesel 14p a litre more expensive.

Where is the justification for the new rates? There was a fuel duty rise in October last year and another one this month. We at ACFO find it difficult to understand how rates can only rise by 1p a mile let alone stand still or indeed fall in other cases.

We want to question the formula used to calculate the rates directly with ministers because the new rates, which are due to be in place for six months, will undoubtedly leave drivers out of pocket.

Company car benefit-in-kind tax rates are known for the next two financial years - 2011/12 and 2012/13 - but employees now taking delivery of new vehicles remain in the dark as to how much their tax bill will be from 6 April 2013.

Historically, the Government has always announced company car tax BIK rates on a three-year cycle so drivers know where they stand. However, that routine has broken down. It is a concern that employees are taking delivery of new cars now and have no idea of how much tax they will be paying on a vehicle they will still be driving in 2013/14.

In the past decade, the Government has given businesses and drivers reasonable notice of company car tax changes. ACFO wants to underline the importance of that to ministers so corporate decision-making can be made in full knowledge of all the tax facts.

With all car motoring taxes now linked to vehicle carbon dioxide emissions including company car BIK tax, Vehicle Excise Duty and capital allowances, it is straightforward for the Government to tighten all thresholds while keeping the tax structure unchanged.

We know the Government is keen to pursue a carbon-cutting agenda. However, due to a lack of face-to-face dialogue with the new Government during its first six months in office, we are in uncharted territory.

Fleet decision-makers will play their part in helping the Government achieve its objectives, but long-term planning is essential for business stability. A significant tightening of rates, for example cutting the capital allowance limit from 160g/km to 140g/km without warning, could cause major problems.

Julie Jenner's predictions for 2011

Companies to increase numbers of fleet suppliers

"While some fleets favour sole-supply arrangements to maximise leverage, cut costs and drive out duplications, others continue to have in place dual- or triple-supplier arrangements to spread the risk.

"Fleets that rely on a sole supply have no options available if their leasing supplier finds that their credit terms tighten significantly. This could then impact on vehicle operations. By taking a safety-first approach and introducing more suppliers, any risk is potentially reduced. The multi-supplier approach is one we could see more of in 2011."

A return to three-year cycles

"The recession resulted in many businesses extending fleet replacement cycles into a fourth or even fifth year in a bid to cut operating cost. However, some fleets reported maintenance cost rises, and from an HR and business perspective it does not always set the right image for older cars to be driven. Therefore, if the economy picks up, we may see fleets return to the more traditional three-year replacement cycle - the move is already happening in a small number of cases."

Increased market consolidation

"The last few weeks of 2010 saw the first move in what could become a long-expected consolidation of the UK contract hire and leasing sector, while the short-term rental segment is also undergoing a major shake-up.

"ACFO anticipates further consolidation in both sectors as the fall-out continues from the recession with a shortage of credit and, particularly in the leasing sector, banks looking to withdraw from the risks associated with owning a vehicle leasing company."