Budget: 5p fuel duty cut frozen, no EV policies announced

The 5p fuel duty cut will remain for another year, the chancellor announced in his spring budget today.

Chancellor Jeremy Hunt said the duty cut, initially brought-in in 2022 when fuel prices hit record highs, would “save the average driver £50 over the next year and bring total savings since the 5p cut was introduced to £250”. It currently sits at 52.95 pence per litre.

He added: “Lots of families and sole traders depend on their cars. If I did nothing, fuel duty would increase by 13% [from] this month.”

Hunt confirmed this measure was still “temporary” and would again be looked at next year.

This move was described as a “missed opportunity” by Fiat Boss Damion Dally, who said the government could’ve ringfenced “some or all the money that would have come from the fuel duty rise” and invest it “into this country’s seemingly dwindling electric vehicle strategy”.

No electric vehicle policies were announced during the budget, despite calls for more buying incentives and a cut in the VAT rate of public charging from 20% to the 5% of home charging.

SMMT chief Mike Hawes said: “Government has been keen to assure the UK automotive industry’s competitiveness, with support for EV development and manufacturing – including £2.1 billion in autumn’s Advanced Manufacturing Plan – but there is little to help consumer demand.

“Today’s Budget is, therefore, a missed opportunity to deliver fairer tax for a fair transition. Reducing VAT on new EVs, revising vehicle taxation to promote rather than punish going electric, and an end to the VAT ‘pavement penalty’ on public charging would have energised the market.

The announcement was, nevertheless, welcomed by the RAC as “good news”, but the motoring organisation called on more to be done for the effects to be felt by drivers.

Head of policy Simon Williams said: “While it’s good news that fuel duty has been kept low, it’s unlikely drivers will be breathing a collective sigh of relief, as we don’t believe they’ve fully benefited from the cut that was introduced just two years ago due to retailers upping margins to cover their ‘increased costs’.”

The spring budget was also expected to bring an answer on the potential extension to the VED exemption of EVs, which will end in 2025, but Hunt said nothing about this. 

Aftermarket reacts to spring budget

Kevan Wooden, CEO at LKQ UK & Ireland, was apprehensive about any rewards the budget could bring, but welcomed some for the industry’s smallest players.

“Garages and workshops will find few gifts for them in the Spring Budget – with the Chancellor largely focused on addressing the consumer tax burden, while continuing to toe a cautious line on public spending as the economy gets back on track,” he said.

“A handful of the industry’s smallest players will benefit from the threshold for VAT registration increasing from £85,000 to £90,000. This could help to free-up vital cash for investment in the skills and equipment needed to supercharge growth. But the rise falls short of the £100,000 threshold that many small businesses had hoped the Chancellor would stretch to.

“The decision to make full expensing permanent, representing a £10 billion tax cut for businesses looking to invest in equipment and machinery, was warmly received in last November’s Autumn Statement. So, new intention to extend full expensing to leased assets will be similarly welcomed by garages and workshops wanting to invest in new electric vehicle (EV) or ADAS servicing equipment.

He added: “However, it was a budget that felt more in favour of ICE then EV, with fuel duty frozen and no new incentives to help motorists to switch to plug-ins.

“Despite this, the transition to electric vehicles continues to be the direction of travel for the industry, being the present for many garages and workshops getting ahead of the competition. It will still be prudent for the industry to invest in the skills and equipment to service electric vehicles sooner rather than later to ensure their long term success.”

Steve Nash, head of the IMI (Institute of the Motor Industry), called it “a budget for an election – but not for a greener environment”.

He said: “Despite talking about encouraging investment in future technologies, today’s spring budget seemed to miss the opportunity to make some small changes that would support the widest automotive sector as it faces a continuing skills gap while trying to future-proof itself. There was also nothing done to encourage more people to move to lower and zero emissions vehicles.

“For the UK to achieve its green ambitions every part of the automotive sector must be supported and that includes the aftermarket.

“Whilst the addition of leased assets in the Full Expensing 100% first year capital allowance may provide some businesses with help, it’s disappointing that the Super Deduction was not reintroduced. This would have provided the wider aftermarket with essential help to ensure it is adequately equipped and trained to support EV drivers.”

However, he added: “It was encouraging to hear that the Chancellor intends to maintain the Back to Work plan and improve the Childcare offer to give more people who may have felt they couldn’t get back to work, back into the workplace.

“Cynics might say it was a budget for an election – sadly it seemed to miss the significance of how important the automotive sector is to the UK’s economic and social infrastructure as a whole.”

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