Budget 2012 - Chancellor seeks to encourage green fleets but raises concerns for the future of electric vehicles
Wed 21 March 2012
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The Chancellor of the Exchequer, George Osborne, has sought to encourage the move to more efficient and lower carbon fleets by extending the 100% first year enhanced capital allowance for low emission business cars for two years to March 2015 whilst tightening the CO2 eligibility threshold to 95g/km from April next year, down from 110g CO2/km currently.
An SMMT spokesman, Jonathan Visscher, told Business Green that changes to the first year 100% ECAs would prove highly attractive to corporate fleet managers. "Cars of every shape and size are making [low carbon] technology step up. Those technologies pushing ahead will get the support." However the BVRLA expressed its disappointment that the leasing companies are excluded the 100% first year allowance. BVRLA chief executive John Lewis said: "The Chancellor’s enthusiastic efforts to drive down emissions-based capital allowances for company cars could be a step too far, too soon. The fleet sector is the only part of the new vehicle market that is still growing at the moment. It will adapt to the new tax regime as it always does, but these ambitious targets could bring a temporary stall to the market as businesses re-evaluate their fleet policies.”
Some concern has been raised from the electric vehicle sector regarding company car taxation. From April 2015, the five-year exemption for zero carbon and ultra-low carbon emission vehicles will come to an end as legislated in Finance Act 2010. The appropriate percentage for zero emission and low carbon vehicles will then become 13% from April 2015 and will increase by two percentage points in 2016–17. Although this provides a clear 5-year steer for fleet managers, the fact that this has not been extended will in the longer term mean a key fiscal driver to incentivise the up-take of plug-in electric vehicles will not be available, bringing EVs’ benefit-in-kind rates in line with petrol vehicles. Dr Ben Lane, Managing Editor of Next Green Car commented: "Even including Plug-in Car and Van Grants, research clearly demonstrates that electric vehicles are more costly to own on a whole life basis. Providing support using graduated Vehicle Excise Duty and company car tax is therefore vital to ensure new technologies get a foothold in the market. While fiscal incentives should be time-limited, 2015 is far too early to expect EVs to compete with much lower priced petrol-hybrids and clean diesels."
Also announced was the establishment by 2013 of a Catapult Centre for Transport Systems. The government revealed plans for a centre that will demonstrate how technology and innovation can develop integrated, efficient and sustainable national transport systems, alongside a centre to focus on future cities.
Other transport/environment related measures announced in the Budget included:
- From 1 April 2012, Vehicle Excise Duty (VED) rates will increase in line with inflation, apart from VED rates for Heavy Goods Vehicles, which will be frozen in 2012-13.
- The carbon dioxide emissions threshold for the main rate of capital allowances for business cars will also fall from April 2013, from 160 grams/kilometre to 130 grams/kilometre
- Fuel benefit will increase by 7.4% in April 2012, and will continue to rise over the following two years by 2% above the RPI.
- Tax on company van private use and fuel has remained unchanged.
- From April 2016, the Government the three percentage point diesel supplement differential will be axed so that diesel cars will be subject to the same level of tax as petrol cars.
- From April 2014 the appropriate percentage of list price subject to tax will increase by one percentage point for cars emitting more than 75 g/km of carbon dioxide, to a maximum of 35% in 2013-2014 & 2014–15, and by two percentage points, to a maximum of 37% in both 2015–16 and 2016–17.
- The government is to consult motoring groups on options to reform to VED over the medium term to ensure that all motorists continue to make a fair contribution to the sustainability of the public finances, and to reflect continuing improvements in vehicle fuel efficiency. Alongside this, the Government aims to develop a direct debit system to allow motorists to spread their VED payments.
- As previously announced in the National Infrastructure Plan 2011, greater private investment in the UK’s roads is to be taken forward. The Government will take forward many of Alan Cook’s recommendations for the roads, including developing a national roads strategy and setting a renewed focus on the level of performance expected from the Highways Agency.
Whilst environmental groups welcomed the Chancellor's decision not to delay the 3 pence rise in fuel duty due to come into effect in August this year, there was scepticism on the planned review of the Carbon Reduction Commitment. Michael Lunn of the Environmental Industries Commission was said "Having previously diverted funds raised from the CRC Scheme from green initiatives into general taxation, the Chancellor has now announced that it must be simplified, or scrapped. This sends a very unhelpful message to those companies working their internal budgets and committing funds to comply with a regulation that may become redundant in just a few months’ time". Following the Budget, expectations are that government will release an aviation plan in the coming months, considering all options for increasing airport capacity which was equally met with disapproval from green groups.
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