Muted response to ‘Election’ budget

Reaction to Chancellor Alistair Darling’s final budget before the election has been muted, with analysts branding it “political budget” with no draconian measures or big giveaways.

Instead of whacking 3p a litre on fuel duty on April 1, as planned, Darling announced the rise would be phased in over several months, with 1p added on April 1, a further 1p added on October 1 and a third penny added on January 1, 2011. But fleet operators believed the impact of the rise would be negligible against a backdrop of rapid fuel price rises.

Ken Trinder, head of business development at epyx, said: “While duty will still rise by 3p, it does mean at least some slight relief for those running company cars and vans, even if those penny rises are likely to look small compared to the underlying diesel and petrol price rises that we are currently seeing.”

Brian Madderson, chairman of RMI Independent Petrol Retailers Association, said the Budget masked another hidden increase in fuel prices: “The Chancellor failed to mention that, in addition to the 1p duty increase from April 1, he has already taken measures to claw back a duty incentive provided to the refiners for biofuels production. This latter measure will result in an increase to the cost of product by up to 1p per litre, also from April 1.

“Thus the real increase to the motorist at the pump will be 2p, plus the VAT multiplier equating to around 2.35p - some 135% more than might have been perceived from his speech to the House.”

AA President Edmund King was more scathing: He said: “Drivers’ relief at the Chancellor not raising fuel duty by 3p on April Fool’s Day will be short-lived if prices continue to rise. The immediate rise of 1p per litre will cost 50p a tank more to fill up. Had the inflation-plus- 1p increase gone ahead, it would have added £1.50 to the typical cost of refilling a petrol or diesel car, or £37.50 a year. Perhaps the thought of 32 million fuming drivers and voters influenced Government thinking.

“In the last Pre-Budget Report, the Treasury admitted that high fuel prices make drivers cut back and reduce tax receipts. It therefore makes sense not to increase the burden on families and businesses struggling to recover from recession - inflicting more pain for no gain, and undermining economic recovery.”

Average UK petrol prices have shot up 4p a litre in the past month, taking them to their highest since July 2008 – the beginning of the great fuel price collapse, the AA Fuel Price Report for March reveals. Soaring wholesale prices, an increase in duty on 1 April and the end of the subsidy for biofuel producers could push the cost of petrol close to 124p a litre just after Easter. Petrol and diesel prices are currently around 116-117p on average, the AA said.

John Lewis, BVRLA chief executive, said: “This was more of a pre-election statement than a Budget and there was precious little for road users to get encouraged about. Staggering the 3p increase in fuel duty will give road users some respite. In reality, they are still applying the thumbscrews, just a little more slowly.”

He said more should have been done: “By doing nothing to reduce grey-fleet encouraging Approved Mileage Allowance Payment (AMAP) rates or the 3% diesel surcharge, the government has yet again failed to remedy the inequalities in its emissions-reduction strategy. However, we do applaud the fact that the Treasury has finally made existing tax incentives technology neutral.

AMAP rates are used to calculate the tax-free rate at which employees who use their own vehicles for business are reimbursed. They have been fixed at 40p for the first 10,000 miles and 25p for every mile thereafter for the past six years.

Neville Briggs, managing director of CFC Solutions, said: “Thse who manage fleets must continue to look for ways to increase efficiency and cut costs in order to contribute towards providing their employers with the competitive edge that they need.”

Sue Robinson, director of Retail Motor Industry Federation, said she was concerned that the  Government was still going ahead with the first registration tax on new cars from April 1, 2010, which could add up to £515 to the price of a new car, depending on its CO2 emissions. “The new car market is likely to see some uncertainty with the Scrappage scheme coming to an end at the end of March and it would seem extremely bad timing to introduce a tax increase on new vehicles at the same time as an incentive to buy is removed,” she said.


£100m to help fix Britain’s potholes

The Chancellor announced in the budget that he will provide £100m for local road repairs and £285m for motorway improvements and expansion projects, such as allowing hard-shoulder running in busy times.

The Chartered Institute of Logistics and Transport in the UK (CILT), welcomed the move, adding that the next government, of whatever colour, must not cut essential maintenance on our transport infrastructure.

Chief Executive Steve Agg says: ‘Poor or zero maintenance, together with the predations of unpredictable summer and winter weather, has resulted in millions of cracks and potholes requiring substantial and urgent repair in order to prevent higher than necessary fuel consumption and vehicle wear, damage to vehicles and risks to safety.

The next Government must make sure that local government is adequately funded to maintain our highways networks: this will contribute towards Britain’s economic and environmental objectives. Neglecting essential repairs now will store up problems and higher costs for the future.”

BVRLA chief executive John Lewis said the road repair grant was inadequate: “According to the annual Local Authority Road Maintenance Survey, local authorities already have an £800m shortfall in road maintenance budgets so handing them an extra £100m is not going to go far."

 


Budget 2010: Key points

  • Fuel Duty – 3p rise in three 1p increments; Alril1, October 1, January1
  • ‘Showroom Tax’ – To be implemented on April 1. One-off first-year payment on top of the VED rate. The payment is based on CO2 emission and will add between £70 and £515 to your first road tax bill. All cars with CO2 emissions above 150g/km affected.
  • Road Maintenance – £100m for local road repairs and £285m for motorway improvements and expansion projects
  • Business Rates – Halved for one year from October 2010
  • Annual Investment Allowances – Increased to £100,000 per year
  • Tax Payments - Businesses will be able to stage VAT and other tax payments
  • National Insurance – Employee and employer contributions increased by 0.5% per cent from April 2011.
  • Small Business Corporation Tax – No reduction

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