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BUDGET 2011: Industry response

Date: 23 March 2011

The business car industry responds to the 2011 Budget.


David Brennan, managing director, said: "LeasePlan welcomes the Budget, which I believe points the economy in the right direction towards recovery, in particular the accelerated lowering of corporation tax and initiatives to encourage enterprise.

"Our initial assessment of the package announced today suggests the Government has listened to the needs of motorists and increasingly understands that business travel is a necessity, not a luxury, and plays a vital role in keeping the economy moving.

"LeasePlan welcomes the Chancellor's decision to cut fuel duty by 1 pence per litre as an important first step in addressing the soaring cost of motoring. Similarly, the abolition of the fuel duty escalator and its replacement by a 'fair fuel stabiliser' is indeed fairer to motorists.

"Until now, many fleet managers had been in limbo, as BIK tax rates were only confirmed until 2012/13. With the announcement that the Government will freeze company car tax for cars emitting less than 95g/km from April 2013 and increase tax for carbon dioxide emissions between 95g/km and 219g/km by 1 per cent, fleet managers will now be able to plan long-term strategies that promote environmentally-friendly policies. This can only be a good thing that will accelerate the take-up of low carbon vehicles.

"This environmental approach is further complemented by the announcement that Private Fuel benefit in kind charge is being increased. Another sign that the Government is actively trying to dissuade employees from receipt of this 'benefit' viewed as encouraging unnecessary travel.

"The plan announced to merge income tax and National Insurance is potentially a positive step to simplify taxation but, as part of the consultation process, there needs to be an extensive review of how this would impact BIK rates.

"Drivers will be cheered by the earmarking of £100 million for potholes but this is likely to be a drop in the ocean...anybody who has driven recently knows the roads are littered with them after a severe winter.

"Overall the picture is more positive today for business drivers and their employers, and welcome relief after the pain of rising pump prices.


"Budget 2011 recognised the strength of the UK manufacturing sector and its ability to steer our economy out of recession," said Paul Everitt, SMMT Chief Executive. "We are pleased to see that the Chancellor's plans have a strong focus on manufacturing and making the UK an attractive place to invest. The outlook is certainly still challenging, but we are encouraged by the impact these measures will have on our sector and the wider economy.

"The cancelling of the fuel duty escalator is a very welcome move that, combined with the 1p per litre reduction, will see immediate financial pressure on motorists eased. This move will help to boost consumer confidence and economic growth, particularly benefiting the commercial vehicle and haulage sector. Hints at changes to the company car tax system are yet to be detailed, but SMMT hopes that part of the proposal includes the removal of the unjustified three percentage point penalty on diesel company cars.

The AA

A freeze in fuel duty and a 1p cut, rather than the 5p increase planned, prevents more pain at the pumps and applies a 'much needed tourniquet to drivers haemorrhaging money from record pump prices', says the AA.  However, volatile oil prices may once again drain much of the benefit of the freeze announced today.

"We and millions of AA members, two-thirds of whom have cut back because of record fuel prices, applaud the Chancellor's decision to listen to the AA campaign to cut fuel duty rather than hike it by 5p a litre.  A £2.50-a-tank hike would have been the last straw for poorer drivers who spend a quarter of their household income on motoring," said Edmund King, the AA's President.

"This action has probably stopped a 'summer of discontent' and is a common sense move.  Any increase in duty would have bled many drivers on low incomes dry so this action offers short-term first aid.  However, with jittery stock markets and tensions in North Africa pushing the oil price back into the $115-$120-a-barrel price range, pressure on pump prices and inflation could grow again.  After all, petrol prices were 5p a litre cheaper only as far back as the end of January.  The early January increase in VAT and duty is already bringing in an extra 5p litre for The Treasury.

"The Government will have to consider further help targeting vulnerable groups, such as volunteer drivers, rural public transport and poorer rural drivers. Despite the freeze more than 80p in the price of every litre of fuel goes directly to the Treasury so the Government is already taking more than its fair share from drivers.

"The Fair Fuel Stabiliser is an idea first mooted by the AA and we are pleased it is being considered. This should bring more certainty to the market."

"The increased approved mileage rates from 40p to 45p are long over-due and very helpful. Companies have been insulated against higher fuel costs while employees, charity workers and midwives using their own cars for work have borne the burden and in effect taken a pay-cut.

"We will need to study the impact of company car tax changes to encourage greener motoring."

"The extra £100 million for potholes is welcome but billions still need to be spent to bring all roads up to scratch."

Vehicle Excise Duty will increase in line with inflation.

Ken Trinder, head of business development, epyx:

"The fleets and dealers that we work with have become extremely lean and focused during the last two years and, having survived the recession and maintained or regained worthwhile profitability, are facing the future with a limited but definite sense of optimism. There is little in this fiscally neutral Budget that looks as though it will substantially change that outlook in the short to medium term, despite the 'feel good' news on fuel duty. The Chancellor's plans to encourage growth and investment such as the Corporation Tax cut are welcome but, if they do have an effect, it will not be for some time. In the immediate future, it will be down to each individual business to ensure that it continues to minimise costs, maximise opportunities and maintain attention on profitability."

CFC Solutions

Neville Briggs, managing director, said: "The Chancellor's moves on reducing the fuel duty and abolishing the fuel escalator are very welcome ones but so many other factors are causing petrol and diesel prices to rise quickly that saving a penny or two on a litre has a limited impact. Certainly, fleet managers should not be using this development as an excuse for inaction on fuel. While savings on fuel duty are welcome, the best way to minimise your company car and van petrol and diesel costs remains a structured fuel policy that enables you to really take control over your fuel use."


IAM chief examiner Peter Rodger said: "Reducing fuel duty is a welcome break for hard-pressed motorists and businesses, but eco-driving is the only guaranteed way to reduce motoring costs. It's no longer an ethical choice, it's a money-saving essential - especially in rural areas where driving is a necessity. The best fuel-saver is a light right foot and anticipating the road ahead."

And regarding potholes, IAM director of policy and research Neil Greig said: "The extra investment in roads is welcome but it is not enough to cure Britain's pothole pandemic. We need to ensure that roads are properly looked after so we don't store up bigger maintenance bills for future."

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