Autumn Budget 2021: Headlines

Friday 29th October 2021

As we emerge from some extremely turbulent times, Rishi Sunak clearly wanted to set a positive tone.

On the face of it, there are some encouraging signs, with the Office for Budget Responsibility (OBR) now expecting the UK’s recovery to be quicker than previously forecast. Or, as the Chancellor put it, growth is up, jobs are up, and debt is down.

Fleet owners, operators and individual drivers will want to consider how the announcements made are likely to affect their current cost of mobility and their plans for switching to electric vehicles in the months and years ahead; which is why we’ve summarised the key headlines and our thoughts below.


Targeted Investment in Decarbonisation

Charging infrastructure boost

The Government is providing an additional £620 million of support for a variety of measures, including a substantial increase in chargepoints for residential areas which lack the off-road private parking spaces needed for home charging.

The funds will also be used to support what Rishi Sunak described as ‘targeted’ plug-in car grants. The terminology could be important here as the scheme has already been changed once (in March this year) when the grant was cut from £3,000 to £2,500 and models that cost more than £35,000 were excluded completely.

This could mean further changes are on the way and van operators will certainly be looking for additional support in making the switch. Whatever the case, the government is clearly looking to allocate funding in areas that will have the biggest impact on business and driver behaviour. However, we may need to wait until the upcoming National Charging Infrastructure Strategy document is released to find out more.

 

Investing in vehicles

The UK automotive sector has been given a £817 million boost, as the UK seeks to lead the way in the manufacture of zero emission vehicles and batteries.

There’s also a £416 million funding package to help commercialise low and zero emission transport technologies, including trials of three zero emission HGV technologies. Whilst it’s not yet clear what these will be, or the weight classes involved, this is welcome news for a sector that is still facing significant challenges in developing a practical and sustainable approach to decarbonisation.

We also know that any increase in funding comes with additional responsibilities and, as highlighted in the recent Build Back Greener document, the government is looking to introduce a zero emission vehicle mandate that lays out regularly increasing targets, from 2024 through to the ban in 2030, in relation to the percentage of zero emissions cars and vans produced by each manufacturer.

 

Continued support for larger scale investments

In January 2019, the government increased the amount of qualifying expenditure for AIA from £200,000 to £1,000,000. The increased limit was due to expire on 31 December 2021 however, in a move that will be welcomed by businesses planning significant on-site investment in charging infrastructure, the Chancellor has now extended this to 31 March 2023.

 

Additional funding to ramp up infrastructure and vehicle development

With the government’s net zero strategy stretching well beyond cars, vans and HGVs, there was a £1.5 billion increase in funding designed to improve the rail, tram, bus, and cycle networks in the mostly densely populated areas of the country.

However, the government simply cannot hit any of their emission targets without a fully decarbonised road network. Incentivising individual drivers and business to start making the switch is not enough. Real change will be dependent on continuing to invest in a UK-wide infrastructure that adequately supports EVs.


Fuel Duty

Frozen for the 12th consecutive year

With natural gas prices soaring, the average price paid at the pump has catapulted beyond the record levels of April 2012, which saw the UK hit 142.48p per litre for the first time, and it is still not clear when the current rises will end. Simon Williams of the RAC recently warned:

If oil gets to $100 a barrel, we could very easily see the average price climb to 150p a litre.

Simon Williams

RAC

And so, it is of some relief that the Chancellor decided to shelve plans for a near 5% rise in fuel duty.


Benefit in Kind

Four years of certainty helps, but further clarity is needed

The Chancellor has faced criticism from the automotive industry regarding the lack of visibility around future rates of Company Car Tax (CCT), so the announcement that the 2022-23 rates will remain frozen until at least 2024-25 is a step in the right direction. Jon Lawes, Managing Director of Hitachi Capital Vehicle Solutions, responded by saying

We welcome the Clarity on freezing the rates to 2024/25, it provides a real incentive for cash takers to switch now back into their Company and join the EV revolution. Whilst it’s understandable that business fleet operators and drivers want a clear picture of the long-term future, rate visibility beyond 2025 doesn’t change the fact that with the government fully committed to zero emissions vehicles, the most generous levels of tax incentives will benefit those who take action now.

Jon Lawes

Jon Lawes

Managing Director

Hitachi Capital Vehicle Solution


Fuel and Vehicle Tax

Modest rises for most, but are there more changes ahead?

The Fuel Benefit Charge is set to increase in line with the Consumer Price Index (CPI) from 6 April 2022. This means that the multiplier used to calculate the tax due, increases for cars from £24,600 to £25,300. For vans, the fuel benefit charge will increase from £669 to £688, and the benefit charge will rise from £3,500 to £3,600.

HGV fleets will also be pleased to see that the two-year HGV Road User Levy freeze, which was due to expire in August 2022, is to be extended until August 2023 and that VED is also frozen for 2022-23.

To complete the picture, VED rates for cars and van are set to rise in line with the Retail Price Index (RPI) from 1 April 2022.

For car and van drivers and operators these are relatively modest rises, but more changes seem likely before too long.

The recently released ‘Greenprint’, which included a clear roadmap towards the 2050 target of a carbon neutral Britain, reinforced the government’s current commitment to banning the sale of new cars and vans fuelled solely by petrol or diesel from 2030.

This means the government must fill the gap in the Treasury’s finances caused by the rapidly increasing number of people and businesses opting for electric vehicles, whilst at the same time providing an incentive to those who have not yet switched.

Exactly what the future holds for vehicle taxation will partly depend on the outputs of previously announced consultations into alternative revenue frameworks, such as road pricing

At least one thing is clear, any sudden hike in tax rates for electric vehicles would likely scupper the government’s ability to hit key emission targets and so any future rises in fuel and vehicle tax will hit ICE vehicles hardest and fastest, accelerating the transition to electric.

There is a clear commitment from Government to the decarbonisation of transport in the UK. The encouraging shift to low emission cars is unlikely to slow even if tax rates increase beyond 2025 as there is likely to be an equivalent increase in taxes on ICE cars. Whilst goods vehicles are significantly outnumbered by cars on the road, they still have a significant impact on the carbon emissions of transport. Bringing goods vehicles into focus within the decarbonisation landscape is encouraging will support government’s ability to hit key emission targets.


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