News Story

Chancellor delivers his first Spring Budget

2017 Spring Budget included fuel duty freeze, corporation tax changes and relief for small businesses
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Chancellor of the Exchequer Philip Hammond delivered his first - and last - Spring Budget to the House of Commons, which included a freeze on fuel duty and a pledge to explore the appropriate tax treatment for diesel vehicles, but ignored the BVRLA’s calls for a more environmentally effective approach to Company Car Tax and Vehicle Excise Duty.

The association has welcomed the Chancellor’s decision to freeze fuel duty for the eighth year in succession, as well as the news that both the VED rates for hauliers and the HGV Road User Levy will remain frozen for another year. However, BVRLA Chief Executive Gerry Keaney said: “Mr Hammond’s first and last Spring Budget was the perfect opportunity to create a fairer, simpler tax system that incentivises the uptake of ultra-low emission vehicles. We are now left with company car tax and VED regimes that do little to support the Government’s green agenda or tackle the growing air quality crisis.

“At the moment, a 20% taxpayer choosing between a pure electric BMW i3 and a hybrid Mitsubishi Outlander – both of which have similar P11d values and sit in the same tax band – will pay the same company car tax over the next three years. The current regime provides no incentive to choose a pure electric vehicle until 2020. The BVRLA’s call for the Government to bring the introduction of the new 2% rate forward from 2020 to 2017 would incentivise drivers to choose cleaner cars now.”

On the subject of Vehicle Excise Duty, Keaney commented: “The Chancellor chose not to defer the introduction of new Vehicle Excise Duty rates which come into force next month. As a result, the car hire industry will see its first year VED bill rise by almost 400% in 2017. Firms will also be unable to claim back £1.67million every year in legitimate refunds. Car rental companies operate the newest fleet on UK roads, and the average rental car is just eight months old. The sector purchases around 324,000 cars each year, but this number is now likely to fall as our members lengthen their operating cycles in an attempt to reduce the cost impact of the new VED regime.”

In HM Treasury's Budget document, it was announced that the Government will continue to explore ‘the appropriate tax treatment for diesel vehicles’, and will engage with stakeholders ahead of making any tax changes at Autumn Budget 2017. Commenting on this, Mr Keaney said: “Diesel vehicles remain a vital part of the fleet mix, as diesel engines are the most energy-efficient internal combustion engines. It is often the most appropriate powertrain for long distance journeys and non-urban freight transportation, and the latest Euro 6 diesel engines have made some major gains in reducing harmful NOX emissions. As one of the stakeholders engaged with HM Treasury, we look forward to working with policymakers to ensure they do not adversely impact the UK automotive sector."

Elsewhere, the Chancellor announced that the Government would provide an additional investment of £270m to fund new disruptive automotive technologies including batteries, artificial intelligence and robotics. This money comes from the £23 billion National Productivity Investment Fund, previously announced at the Autumn Statement in November 2016. The Industrial Strategy Challenge Fund (ISCF) will support collaborations between business and the UK’s science base, in a bid to transform the UK economy.

Citing the benefits that improved infrastructure will have on the UK’s productivity, Mr Hammond also announced a £690 million competition for local authorities' transport projects, to improve congestion on roads and public transport. There was also a £220 million fund announced to improve congestion points on national roads, with £90 million going to the North and £23 million to the Midlands. More detail will be announced by the Department for Transport in due course.

Not only did the Government used the Budget to reaffirm its commitment to improving air quality, but it also confirmed that it would provide extra support to small businesses in England facing a significant increase in their Business Rates. The Chancellor confirmed that Corporation Tax will fall to 19% from April 2017, and to 17% in April 2020, and said that the Office for Budget Responsibility has revised up its forecasts for economic growth, predicting 2.0% growth in 2017/18.

The BVRLA has produced a full summary for members, which is available online.