Pre-COP Budget freezes fuel duty (again), provides more details on 'Bus Back Better'

Wed 27 October 2021 View all news

The Chancellor, Rishi Sunak, has frozen fuel duty for the 12th year in succession in the 2021 Budget. Announcements in the combined Budget and Departmental Spending Review (SR) package confirm some new elements of the Government's plans for transport decarbonisation. 

The Budget and Spending Review document notes that transport is now the highest emitting sector in the UK, accounting for 32% of domestic emissions in 2019.  It confirms a total of £6.1 billion to support the policies and strategy set out in the Transport Decarbonisation Plan, published earlier this year. 

The Budget and SR confirms additional funding to support the commitment to end the sale of new petrol and diesel cars and vans in 2030 and all new diesel vehicles by 2040. The Government says it will provide an additional £620 million for public charging in residential areas and targeted plug-in vehicle grants, adding to the £1.9 billion committed at the 2020 Spending Review.

Also announced is an increase in capital support to £817 million over the Spending Review 21 period for the electrification of UK vehicles and their supply chains.

£416 million of UK-wide R&D funding for programmes are announced "to help commercialise low and zero emission transport technologies, including trials of three zero emission HGV technologies".

Meanwhile, over £3bn is committed to bus and cycling invesment over this Parliament, including a new dedicated commitment of £1.2 billion for "bus transformation deals to deliver London-style services, fares and infrastructure improvements". There is also confirmation of a further £355 million of new funding for zero emission buses, and an allocation of £70 million Zero Emission Bus Regional Areas (ZEBRA) funding to deliver buses and related infrastructure in Warrington, Leicester, Milton Keynes, Kent, and Cambridgeshire and Peterborough.

The Budget and SR has confirmed over £2 billion of investment in cycling and walking over the Parliament with a commitment to "build hundreds of miles of high-quality, segregated bike lanes and other facilities to improve cyclists’ safety". This includes £710 million of new investment in active travel funding over the next three years.

However, commentators observe that only £1.5bn of the funding announced is new; the Government includes in the overall figure the £4.2bn promised at the 2019 budget, and subsequent funding promised through the Ten-Point Plan and Transport Decarbonisation Plan.

The Chancellor confirmed that the 12th consecutive year of freezes to fuel duty will be extended. (The Treasury says the freeze returns £1900 to the average UK car driver compared with the situation had the pre-2010 duty escalator continued.) Sunak also reiterated the Government’s commitment to end the relief on red diesel duty in 2022, except for selected sectors including agriculture.

The Budget also set out an investment package of £5.7 billion for eight English city regions to transform local transport networks through London-style integrated settlements. This includes: 

  • £830 million to West Yorkshire for schemes such as the A61 improvements for buses, cyclists and pedestrians between Leeds and Wakefield; 
  • £1 billion to Greater Manchester for schemes such as the next generation Metrolink tram-train vehicles; 
  • £1 billion to the West Midlands for schemes such as completing the Wednesbury to Brierley Hill metro extension and Sprint Phase 2; 
  • £710 million to Liverpool City Region for schemes such as battery power for new Merseyrail trains to expand the reach of the existing network; 
  • £570 million to South Yorkshire for schemes such as starting the renewal of the Supertram; 
  • £310 million to the Tees Valley for schemes such as upgrading Middlesbrough and Darlington stations and improving local rail links; 
  • £540 million to the West of England for schemes such as a fully prioritised bus route between Bristol and Bath. 

The £5.7 billion is a five-year settlement and has been increased from the initial £4.2 billion proposed, the Treasury said. The £1.2 billion of funding to make bus services cheaper and more frequent is part of £3 billion that Prime Minister Boris Johnson committed to spending on a 'bus revolution' as part of the 'Bus Back Better' national bus strategy announced in March. 

In other developments, the Chancellor announced a reduction in air passenger duty (APD) for domestic flights in a move that was strongly criticised by environmental groups as sending the wrong signal in the lead-up to COP26. However a new, higher band of APD was introduced for long-haul flights of over 5,500 miles.

There was also a commitment to provide £180 million to kick-start the development of commercial-scale UK sustainable aviation fuel (SAF) plants and a SAF clearing house to test and certify new fuels.

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