Spring Statement

Spring Statement: Industry responds

Thursday, March 24, 2022 - 07:37
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Yesterday, 23rd March 2022, Rishi Sunak delivered his Spring Statement. In it he stated that fuel duty will be cut by 5p until March 2023, National Insurance threshold will rise to £12,570, and Income Tax will reduce by 1p in 2024. There has been extensive reaction from the motor and transport sector to his statement as follows:

Commenting on the Chancellor’s announcement on the 5p cut in fuel duty, Edmund King, AA president, says: “The AA welcomes the cut in fuel duty. However, we are concerned that the benefit will be lost unless retailers pass it on and reflect a fair price at the pumps. Average pump prices yesterday hit new records- despite the fall in wholesale costs.

“The Chancellor has ridden to the rescue of UK families and businesses who use their vehicles, not for pleasure, but to function in their daily lives. Since the start of the year, the 20p-a-litre surge in pump prices has been the shock that rocked the finances of families, and particularly young drivers, pensioners and lower-income workers who need to commute each day.”

Matthew Walters, Head of Consultancy Services and Customer Value at LeasePlan UK, said:

On the economic forecasts:

“After two years of pandemic, this was already a challenging time. But now, as the Budget’s economic forecasts suggest, businesses and individuals face new challenges born of global uncertainty and rising prices.

“However, the fleet industry is well placed to overcome these challenges. Not only did we account for half of all new car sales in 2021, but we are also leading the adoption of the cleaner technologies that will define motoring’s future.”

 On the Fuel Duty cut:

“We strongly welcome Rishi Sunak’s decision to cut the main rates of Fuel Duty by 5p to 52.95p a litre. With pump prices at record highs – and rising – motorists needed something more than the rate freeze that has persisted for over a decade now. In this respect, the Chancellor has delivered.

“However, as welcome as this duty cut is, it is likely to offer only limited relief to squeezed budgets. The average cost of a litre of petrol has risen by more than 5p over the past week – if that trend continues, the Chancellor’s discount could effectively be wiped out within days.

Of course, what it most helpful for the future is strong, consistent, long-term incentives for electric motoring, so that more people can afford to switch to EVs and avoid high prices at the pump.”

On Company Car Tax Rates:

“Previously, Rishi Sunak had a good record on warning businesses and motorists of upcoming Company Car Tax rates. However, that record is starting to tarnish. The rates for 2025-26 and beyond still haven’t been confirmed – meaning that fleets entering into three- or four-year contracts today are unable to plan properly for the future.”

Commenting, BVRLA Chief Executive, Gerry Keaney, said:  “It is great to see that the Government is now open to new ideas on capital allowances. This reform could play a massive role in driving fleet and charging infrastructure investment and we will be pushing for rental and leasing to be treated fairly as an efficient and effective means of financing new assets.”

As the trade body for the vehicle rental, leasing and mobility services sector, the BVRLA’s members own and operate around four million vehicles in the UK. The sector is already responsible for the majority of battery electric vehicle registrations, with BVRLA members responsible for around half of new vehicles sold in the UK each year.

Jon Lawes, Managing Director, Novuna Vehicle Solutions: “As expected, the Chancellor wasted no time in confirming plans for ‘the biggest cut in fuel duty ever’ in today’s Spring Statement, with the reduction of fuel prices against the eye watering 55% price increases witnessed over the past two years.

“What UK businesses require now however, is greater clarification on future Benefit in Kind (BIK) rates beyond 2025, which will need to be confirmed in the Autumn Budget, if not before. Addressing the cost of EV public charging and plans to ramp up the availability of public charge points will be extremely welcome when the EV Infrastructure Strategy is released.

“However, there is money already on the table that local government could be doing more to use. Our own research has found little evidence that a quarter of a billion gross annual capital investment fund granted to the UK’s nine Metro Mayors is being used to install much needed EV infrastructure. We are calling for local Governments to address the EV infrastructure shortage and use their budgets to increase the number of charging points across the UK to support to the UK’s rapidly growing EV market.”

Jai Kanwar, Co-Founder, Zeus Labs, the first UK-based digital road-freight management platform, said: “Our economy is reliant on hauliers, yet they aren’t being compensated to account for the rising cost of fuel, and nor are they receiving any government support. The proposed five pence cut in fuel duty might save a haulier up to £12 a day per truck, but bear in mind that the cost of diesel has increased by 27 per cent in the last year. Hauliers who drive hundreds of miles every day may still be paying up to £418 per day per vehicle for fuel.

“HGV drivers are already facing serious challenges, particularly the small and medium sized businesses who feel it the most. The escalating cost of fuel will no doubt have a serious impact on this already fragile industry, and the knock-on effect to the supply chain could be devastating without additional support from the government. The chancellor must consider ways to support small and medium sized hauliers, who play a critical role in keeping our economy running. A more significant cut in fuel duty for those delivering vital commodities is called for. Only this way can we slow price rises across the board. If haulage companies are forced to increase prices, it will have a knock-on effect on inflation.”

Louis Rix, COO and co-founder of car finance platform CarFinance 247, says: “While Chancellor Rishi Sunak has pledged to cut fuel duty by 5p, this will be a drop in the ocean for the average consumer; fuel prices won’t fall to anywhere near affordable, even with the cut. Consumers may save £2 or £3 on a tank of fuel, but for those who have to fill up weekly, consumers won’t see any real impact on their day-to-day finances. The Chancellor has also left fuel station owners in a difficult position; they may be struggling financially too, which could result in consumers seeing no benefit whatsoever from the fuel duty cut.

“In today’s statement, the Chancellor needed to implement much more severe cuts to fuel duty to make a difference to Brits’ escalating fuelling costs. Driving is just one aspect of a consumer’s personal finance; Sunak’s decision to stick with plans to increase tax contributions by 1.25 percentage points will still be a crippling hit for many workers. Reports that the average adult will spend £1,000 more per year in taxable income leave many facing critical choices at home between heating, driving, and even food.”

After today’s Spring Statement, ChooseMyCar.com Nick Zapolski commented on the fuel duty cut “While we all expected a decrease in fuel duty, the 5p trim is a mere drop in the ocean and will not be a significant help for most of us. The 5p reduction in fuel duty will see about a £2 saving for most people when they fill the tank. It’s lucky so many of us are still remote working as people can’t afford to work! Our research released this week showed that 45% of people admitted they are struggling to afford to run their cars to get to work!”

Ashley Barnett, head of fleet consultancy at Lex Autolease, commented: “An electric future simply can’t happen overnight. While rising fuel prices might trigger a switch to an electric vehicle, the affordability of EVs still remains a key barrier towards mass adoption, with an ICE vehicle the only option for many drivers. Therefore, as fuel prices continue to soar at an alarming rate, it’s welcoming to see the government take steps to reduce taxes on fuel and alleviate the pressures that businesses and motorists are continuing to face at the petrol pump.”

Howard Cox, Founder of the FairFuelUK Campaign: “It would be churlish not to be thankful to the Chancellor in cutting Fuel Duty by 5p for 12 months. Well done Rishi! Our relentless campaigning has been fruitful. It will give some respite to millions of motorists, that have had and continue to have no choice but to drive. Just as important this fiscal relief to hauliers and small businesses teetering on survival, desperately need this reduction more than most road users, it’s way overdue.

It will only benefit drivers and the economy if the new fuel taxation level becomes permanent and is accompanied by the introduction of an independent pump pricing watchdog, we’ve notionally called PumpWatch.

Today’s fuel duty reduction must be passed onto drivers immediately.”

Martin Jenkins, CEO Zenith Commercial and group strategy director, said: “We’re pleased to see the Chancellor taking measures to reduce fuel costs for UK motorists who pay the fifth-highest cost for fuel in Europe. This reduction will help fleet operators who have seen the cost of diesel rise by 40% over the last 12 months, with prices 30p per litre more expensive than the start of the year.

“However, rising fuel costs is just one of many factors that have hit commercial fleets hard recently. Operators will need support to navigate the short-term cost pressures as they take the significant leap into zero-emission transport models over the next decade. We hope this is just the start of further measures taken by the Government and that the critical role played by commercial fleets will be given due consideration as motoring taxation policy evolves to accompany that transition.”

David Brennan, CEO at Nexus Vehicle Rental: “Following over two years of uncertainty and business challenges, the UK economy is still clearly feeling the effects of Brexit and the pandemic. Now, due to the ongoing conflict in Ukraine, the global supply chain disruption leading to continued shortages and the full scale cost of living crunch well under way, there was a clear sense of nervousness when tuning in to today’s budget.

“With fuel prices already rising at the fastest pace in three decades, the Ukraine conflict is now exacerbating these existing pressures, pushing up global oil and gas prices further. With fuel costs at a record high, we welcome the announcement of a cut to fuel duty by 5p a litre from 6pm this evening – only the second time this has happened in the last 20 years. Whilst this may offer some relief to individuals and businesses operating their fleets, it is estimated to only be around £3.30 per tank.

“This clearly shows that the government recognises the need to support individuals and businesses dealing with the rising costs of living, however we acknowledge that this is just one challenge that the industry is currently facing, alongside a great shortage of vehicles and parts that are making manufacture increasingly difficult.

“As we move ever-closer to the 2030 ban on petrol and diesel vehicles, there is still more that needs to be done to support EV manufacturers to ensure they are more affordable for businesses. Once again, I must reiterate that enhanced financial support is still needed from the government to increase affordability of the vehicles and ensure there is suitable infrastructure in place for businesses that decide to make this important transition.

“Overall, while today’s budget highlighted that there will be a tough period ahead, we hope that the fuel duty cut will act as a small relief for the fleet industry against the backdrop of the supply shortages and ongoing challenges associated with this.”

David Bushnell, Director of Consultancy and Strategy at Fleet Operations, said: Pump prices have hit fleets particularly hard over recent weeks and so the 5p cut in fuel duty must be welcomed.

This may be ‘the biggest cut to all fuel duty rates ever’, but we cannot lose sight of the fact that this cost burden has not just arisen following the crisis in Ukraine. Average petrol and diesel costs have risen by 33% and 38% respectively in just 12 months, from 124.6p and 129p per litre in March 2021.

Oil price volatility shows few signs of abating and so fleets must find other ways to ease the financial pressure. With the business case for electrification growing ever stronger, fleet fuel strategies should continue to be reviewed, along with cost control measures that can help ease the financial burden – from effective vehicle maintenance and fuel discount structures to more effective mobility management.

It is also worth noting that the decision since 2010 to freeze fuel duty has led to an increase in emissions of up to 5%, so the fuel duty cut obviously does little to support the UK’s Road to Zero ambitions. The Chancellor may have scrapped VAT on home energy-saving measures such as insulation, solar panels and heat pumps but has offered fleet operators nothing in the way of any new incentives to encourage EV take up which may have helped balance out the CO2 impact of the fuel duty rise.

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