Transport & Car Blog

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Budget to remove fuel hikes and encourage electric cars

  Friday, 22 March 2013

This year’s budget has included two favourable pieces of news for the motor industry.

Chancellor George Osborne this week scrapped a September rise in fuel duty, potentially saving the average driver of a Ford Fiesta £7 every time they fill up.

Petrol will now be 13 pence per litre cheaper than it would have been had the duty not been frozen over the last two years; this is likely to please motorists who have been paying for long term rises in the price of oil.

However, the Chancellor has also encouraged the industry to reduce its reliance on fossil fuels with a tax incentive for ultra-low carbon vehicles.  

Firms purchasing ultra-low carbon cars for their staff will benefit from an extension to the 100 per cent first year tax allowance, as well as new company car tax rates for the lowest emitting cars:

“We’ll support the manufacture of ultra-low emission vehicles in Britain with new tax incentives. From April 2015, two new company car tax bands will be introduced at 0-50g/km C02 and 51-75/km C02,” he said.

This in particular will benefit manufactures of electric vehicles (EV); plug-ins like the Nissan’s LEAF will now offer less of a tax burden to buyers and better value overall.

With Benefit in Kind (BIK) tax rates now only five per cent of their price in comparison to the 13 per cent originally announced, their popularity is likely to rise.

 “The Budget announcement means that…more will look to choose an EV like the LEAF as their next company car,” said Jon Pollock, Nissan corporate sales director.

“This should increase EV sales, at the same time as helping bring down emission levels.”

Nissan has recently begun manufacturing the LEAF car at its Sunderland plant. The tax announcement comes at a time when the car manufacturing industry in Britain is expecting to reach a trade surplus for the first time in 40 years.

Despite the scrapping of September’s fuel duty hike, which cost the Government £6bn in revenue over two years, motorists are unlikely to be reacting to the news with cheers:

“With current fuel prices at 138.42 for petrol and 145.24 for diesel, drivers will welcome the scrapping of the fuel duty hike with relief rather than with joy. Prices are almost 5p a litre higher than when the Chancellor froze fuel duty in March 2011,” said AA President Edmund King.

The fuel hike scrap has also worried environmental groups, who argue that we need to trade in cars which rely on fossil fuels and find lower-carbon alternatives.

“The Chancellor’s refusal to raise fuel duty in line with inflation has deprived Treasury coffers of £5 billion in the last two years,” says Friends of the Earth’s Head of Campaigns Andrew Pendleton.

“The driving force behind rising petrol prices is the soaring cost of oil – the sensible long-term plan is to protect motorists from rising fuel prices by weaning our transport system off its oil dependency.”

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