Motorists reel after heavy-hitting budget

Chancellor of the Exchequer George Osborne delivered his third budget today, and afterwards the motorist was among those feeling heaviest hit.

Industry and lobby groups combined to slam measures that included tougher emissions rules and a refusal to abandon fuel duty rises.

Many had called for a 3.02p increase in fuel duty planned for August to be scrapped due to soaring prices at the pumps. But the Chancellor indicated the rise would go ahead.

He announced that road tax would rise by the same rate as inflation, though it would be frozen in 2012-13 for road hauliers.

The Chancellor made efforts to force fleets to use low CO2 cars by reducing the business car allowance threshold, to 95g/km, and added that leased cars would not be eligible.

A three per cent company car tax premium on diesel vehicles is to be rescinded from 2016, but remarkably the Chancellor also said he would remove an exemption from company car tax awarded to electric vehicles.

Edmund King, president of the AA, describes the planned rise as “a Budget blow-out that will force drivers off the road.”

Head of car insurance at insurer confused.com Gareth Kloet also slams the planned rise.

“This fuel duty hike is yet another blow to the cost of running a car. Fuel price increases coupled with vehicle tax rises will certainly impact on people’s lives and we may see people being driven off the roads,” he says.

According to John Lewis, chief executive of the British Vehicle Renting and Leasing Association the Chancellor “has missed an open goal by deciding not to cut fuel duty.

“We will see public outrage at fuel prices continue to rise ahead of the scheduled August duty increase,” Lewis says.

“Buying fuel to get to work or deliver your company’s products and services is not a discretionary spend. To continue to ratchet up fuel duty as if it is a pernicious luxury like alcohol or tobacco is misguided and cynical.”

Lewis believes the Chancellor’s move to eliminate company car tax exemption for electric vehicles from April 2015 could kill the market. “The Chancellor is getting rid of one of the main incentives for fleets to operate them,” he says.

On the company car tax moves, Lewis says that “the Chancellor’s enthusiastic efforts to drive down emissions-based capital allowances for company cars could be a step too far, too soon.”

The Society of Motor Manufacturers and Traders praises a number of business measures unveiled, saying that the Budget recognised the significance and importance of a rebalanced, export-led economy.

SMMT Chief Executive Paul Everitt says the Government is taking steps to encourage international investment in R&D and manufacturing in the UK through considered taxation reforms and incentive programmes.

“The Chancellor’s actions to improve R&D tax credits and develop a catapult for transport systems and future cities will help trigger substantial extra business investment in the years ahead,” Everitt adds.

“The UK automotive industry is attracting major levels of investment and creating real opportunities for engineering and manufacturing businesses.”

Everitt also highlights the Government’s continued support for low and ultra-low carbon vehicles as “an essential part of delivering on its environmental and industrial ambitions.”

Words by: Andrew Charman