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PBR09: Industry experts comment on the Pre-Budget Report

Date: 09 December 2009

PBR 2009

Comments from leading fleet, automotive industry and business commentators.

Julie Jenner, ACFO, chairman

  • The Pre-Budget Report confirms ACFO's view of what was probable, and provides the relative stability for the sector that we asked for when we met with the Exchequer secretary in October. With powerful tax incentives for take-up of electric cars and vans from April next year, and the confirmation of further tightening of company car BIK tax from April 2012, the Chancellor is driving fleets and company car and vans drivers ever further along the 'green' route.
  • ACFO has for many years been advising members and all fleet operators that to keep operating costs under control low emission vehicles were the optimum choice. Fleet best practice clearly supports a positive approach to use of low carbon cars and vans.
  • Fleet decision-makers and drivers who continue to fail to heed these warnings will not only see their tax bills rise but they will also see their fuel bills soar as fuel costs increase. Low emission vehicles deliver first-class MPG, reduced costs and lower tax charges.
  • Meanwhile, the significant increase in the fuel benefit scale charge from next April should result in almost all employees giving up this perk. Despite regular increases in this tax and a wide range of experts advising that it is generally much more cost-effective for employees to pay for fuel used privately out of their own pocket, thousands of drivers continue to be in receipt of company paid for fuel.

Mike Moore, Deloitte, employment tax director

  • The announcement of tax breaks for electric cars and vans provided for employers has provided a shot in the arm for electric cars as employers can now provide a tax free benefit for employees with no employer National Insurance. This measure, in conjunction with the tightening of the emissions thresholds for benefit in kind tax and the increase in the fuel benefit tax, continues the trend by the Government to use the tax system to encourage businesses and drivers to select greener low emission vehicles. This should provide a further incentive for employers to assess their current fleet policy and its true after tax cost and ensure they maximise the use of the tax incentives provided by the Government.

Edmund King, AA, president

  • The pre-budget report brings some relief but no Christmas cheer. We are pleased that the Chancellor has not brought forward the projected increase in fuel duty from April. Petrol and diesel in the UK are already heavily taxed so the VAT increase will hit drivers. This pre-budget report may have brought Christmas cheer for Bingo regulars but there is no "full-house" for the driver unless he has an electric company car.
  • We welcome plans to exempt electric vehicles from company car tax for 5 years. However, most sales reps would struggle getting up and down the M1 in the current range of EVs available. Hopefully this will encourage motor manufacturers to bring an iconic electric vehicle to market as soon as possible. The AA hopes that a good, affordable, stylish, well-performing, safe, longer range family electric car will come to market in the next few years.

John Lewis, BVRLA, chief executive

  • We are really pleased that the Chancellor has listened to our call to modernise the business tax regime and give a clear, long-term incentive for companies willing to be early adopters of electric cars and vans. Together with the £2,500 - £5,000 incentive the government is planning to introduce from 2011 for people buying ultra-low carbon cars, these new measures will help speed-up the mass market adoption of sustainable road transport in Britain. We believe business users will be at the forefront.

Professor Stephen Glaister, RAC Foundation

  • The incentive for companies to go electrify their car fleets is to be welcomed as this will help provide a mass market for low-carbon vehicles and encourage a charging infrastructure to be established. Motorists' relief that no more fuel duty rises were announced today will be short lived. VAT will return to 17.5% on January 1st and that means the current price of a litre of unleaded petrol will go up by 2.5p. And all this is before the 1p above inflation rise already planned for April, and speculation of a further VAT increase after the election. While the commitment to continue the M1 upgrade is good news, the medium term outlook for road building and maintenance programs is bleak. Motorists should get used to potholes, as there is little chance of them being filled as the spending squeeze continues to bite and highways spending slips even further down the priority list."

Paul Ashton, Equalease, managing director

  • The Pre-Budget statement contains some interesting news for fleets, especially in terms of incentives to operate electric vehicles, but what it cannot predict is how quickly confidence will grow in industry as a whole and therefore the fleet sector. Entering 2010 will very much be a case of waiting and seeing whether we see the first few green shoots that we have emerged in recent months begin to bud or whether we will continue to be bogged down in economic mire. Confidence will have a much greater impact on the fleet sector in the next year than any measure that any Government could reasonably take.

Phil Peace, Hitachi Capital Vehicle Solutions, director of sales

  • This Pre-Budget Report contained little of much significance for fleet managers or suppliers. Most of the key policy changes were put in place in the last budget. The current company car tax policy is already working well and driving down the CO2 of fleets. Fleet managers are already in the "green mindset", and this will continue to influence vehicle choice due to the benefits of the company car tax regime. The nod to exemption on electric cars and vans was interesting, however, but reliant on considerable development of the infrastructure to support the use of electric vehicles before it is likely to stimulate widespread adoption. Manufacturers will suffer most from the biggest changes in this report and as such are facing a potentially difficult time in 2010. The withdrawal of the scrappage incentive scheme and the return to 17.5% VAT could combine as a negative 'double whammy' and suppress volumes. All-in-all it was a rather predictable pre-budget report - leaving any difficult decisions to the next elected Government.

Sue Robinson, RMI Director

  • VAT RATE: The rise in VAT to 17.5 per cent on 1 January 2010 will have an impact on consumer spending power and this in turn will impact new car registrations and the used car market. We would urge Government to delay this rise until the economy shows some positive signs of recovery and then commence a phased introduction of the increased rate.
  • SCRAPPAGE: The RMI is disappointed that there has been no extension announced to the car scrappage scheme. The current scheme is self-financing and has stimulated the new car market. By 29 November, the Department for Business Innovation and Skills (BIS) had received notification of 282,898 orders for new vehicles under the scrappage scheme. The industry would have welcomed a further extension to off-set some of the negative market forces that could occur in 2010, particularly with the rise in VAT rate.
  • SMALL BUSINESS CORPORATION TAX: While we welcome the freezing of the small business corporation tax rate, any future increase in corporation tax for small businesses - of which a number are in the motor industry - will be damaging to the UK economy. Small businesses are the driving force of the UK and need support during this critical period of recovery. Instead of penalising businesses by increasing corporation tax the Government should be reducing the rate to encourage entrepreneurship and investment.
  • BUSINESS RATES: Although we welcome the extension of the empty property rate relief for 2010/11 the scope of the relief is derisory at £18,000 and will provide help for very few businesses.
  • ENVIRONMENT - ELECTRIC CARS: We welcome the Government's decision for electric cars to be exempt from company car tax for five years. However we are conscious of the fact that demand needs to be stimulated as this is a very small sector of the new car market. Further, we welcome the extension of a 60 per cent vehicle allowance for electric vans; however this is still a relatively small percentage of the total market place.
  • FIRST REGISTRATION TAX FOR NEW VEHICLES: The motor industry has serious concerns regarding the impact on consumers that an introduction of first year registration fee for new vehicles would cause that was announced in the budget, April 2009. This introduction will lead to increased costs to the public of buying a vehicle and will directly stifle demand during a time of recovery for the automotive sector. We would strongly urge the Government to review the introduction of this tax.

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