Budget 2018 - The ALD View

ALD Examine the "giveaway" Budget

­­In recent years, the Government's budgets have brought about a lot of change for fleet professionals. The Summer Budget of 2015 introduced a new system of Vehicle Excise Duty (VED). Autumn Statement 2016 changed the rules around Optional Remuneration Arrangements and reformed the system of Company Car Tax (CCT). Autumn Budget 2017 raised taxes on diesel cars. And that's before we consider all the electric vehicle grants, driverless car trials, and infrastructure spending in the margins. It has been a time of great upheaval.

 

Would Philip Hammond's latest fiscal statement, Autumn Budget 2018, continue this run? It certainly had the potential to. As the last Budget before the UK's departure from the European Union, as well as the first Budget of what ministers are calling the post-austerity era, this was built up as a significant document – and it might have been particularly significant for fleets. Ahead of its publication, there was speculation that it would make further changes to CCT to account for the new emissions tests, or perhaps even reveal a new VED regime for vans.

 

In the end, however, Autumn Budget 2018 was not as significant as other recent budgets. For various reasons, it felt more like a placeholder document – as though the main policy announcements are yet to come.

 

This isn't to say that Hammond made no policy announcements. For example, he confirmed that the main rate of Fuel Duty would be kept frozen at 57.95p in the next financial year. But, whilst this is welcome relief for motorists who have seen petrol and diesel prices rise by around 12% over the past twelve months, this is also an unsurprising measure. Fuel Duty has been frozen for nine successive years now, and Theresa May had already announced this latest extension in her speech to Conservative Party Conference at the start of the month.

 

Something similar could be said of the Budget's major infrastructure spending commitments. An extra £28.8 billion for improving the national road network, to be divided over the next five years, is as impressive as it is necessary. It will speed the country's transition to cleaner motoring, as people will be more likely to invest in electric vehicles if they know that they can enjoy a smooth journey in them. But it ought to be said that this spending is attributable to Hammond's predecessor, George Osborne, and his decision to reform VED so that its revenues go into a special 'Roads Fund'. In other words, we knew it was coming.

 

Autumn Budget 2018 did contain some measures that we didn't already know about. Among them is the extension of the Enhanced Capital Allowance scheme for electric vehicle charge points – by which companies can claim 100% first-year tax relief on any charge points they install – until 31 March 2023. Another is the decision to maintain a lower rate of Fuel Duty for alternative fuels until 2032, pending a review in 2024. And yet another is the decision to allocate £90 million to developing 'Future Mobility Zones', in which various mobility innovations – such as digital ticketing – will be trialled. These are all positive policies that will encourage cleaner and more efficient motoring.

 

However, what really stood out from this Budget was the number of policies that are yet to be confirmed. You may remember that, earlier this year, ministers ran a consultation on introducing a new VED system to encourage the uptake of cleaner vans. A summary of the responses to that consultation was published alongside the Budget, and it also contains a detailed description of how the Government intends to proceed. The only thing we didn't get? The finalised new rates of VED for vans. They will, apparently, be revealed ahead of next year's Finance Bill.

 

The Chancellor is also leaving us waiting for his decision on the new emissions test, the Worldwide Harmonised Light Vehicle Test Procedure (WLTP), and how it interacts with the tax system. The transition to WLTP could push some vehicles into higher brackets for taxes such as CCT and VED, but it's expected that the Government will act to limit this effect. How will this be done? The Budget revealed only that the Government will 'review the impact of WLTP' – and then report back in the spring.

 

Of course, we should allow our politicians time to review the subject matter before making their decisions. But how much time is too much time? It's now two years since Philip Hammond introduced a new system of CCT by revealing the rates for 2020-21, yet he still hasn't confirmed the rates for any year beyond then, not even in this latest Budget. This means that some businesses and company car drivers won't know how much tax they will pay in the final years of their contracts – which goes against the Chancellor's stated desire, elsewhere in his speech, to 'deliver necessary certainty for forward planning'.


All of which makes Autumn Budget 2018 rather hard to judge. It contains some fine policies that we already knew about. It contains some fine policies that we didn't know about. But, most of all, it hints at a number of changes that are yet to be determined. Already, our attention turns to 2019.

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Notes to editors
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ALD Automotive UK Marketing   |   ukmarketing@aldautomotive.com
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