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Alphabet: Councils missing a trick with mileage-rate cuts

Date: 09 October 2012   |   Author: Jack Carfrae

Leasing giant Alphabet has warned that mileage rate cuts within the public sector may not equate to the savings that authorities are expecting.

BusinessCar reported on North Lincolnshire Council's reduction of its staff mileage rate from 52p to 45p pence in August, which the council claimed would save £600,000. Alphabet, though, described the move as a "knee-jerk" reaction.

Clive Buhagiar, head of public sector at Alphabet, said: "If we take the headline £600,000 saving and divide this by 7p per mile, this gives us the figure of 8,571,429 (the number of business miles reclaimed every year).

"If we multiply this mileage by 45 pence per mile (new rate), this gives us a cost of £3,857,143 fuel cost for the council's 'grey fleet', assuming this is over a three-year cycle."

Buhagiar calculated that public sector fleets would be better off with an efficient, outsourced pool car fleet: "If they had switched to a typical diesel pool car fleet (sub-1600cc), the HMRC rate is 12p per mile, giving a fuel cost of £1,028,570, based on 8,571,429 miles.

"If we then assume a £2000 rental per year and base this on 100 cars, this comes to a total hire cost of £600,000 over three years.

"Assuming an insurance cost of £600 per car per year, this comes to £180,000 over three years, making the total cost of the pool car fleet over the period, £1,808,570. This gives us a saving of approximately £2 million over the grey fleet choice every three years."

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