LowCVP voices concerns over reform of VED in Budget 2015
Thu 09 July 2015
View all news
In his Summer 2015 Budget, the Chancellor has announced a major reform to the Vehicle Excise Duty (VED) banding system for cars registered on or after 1 April 2017. First year rates will vary according to the vehicle’s CO2 emissions but there will now be a flat standard rate of £140 for all cars for subsequent years, except for zero emission vehicles (ZEVs), for which there will be no charge.
Cars, including zero-emission cars, with a list price above £40,000 will be subject to a £310-per-year supplement for the first five years in which the standard rate is paid.
The Chancellor also announced that fuel duty, a larger overall source of revenue to the Exchequer than VED, will remain frozen.
In response to the Budget announcements, LowCVP Managing Director Andy Eastlake said:
"As many recent reports have shown, over the last five or more years the UK automotive sector has enjoyed a renaissance built upon a consistently applied policy focused on cutting carbon emissions. Vehicle Excise Duty has been an important element in that overall policy picture.
"The LowCVP supports a CO2-related first year VED but is concerned about the impact of flat (£140) annual duty rates on the cost-conscious second-hand buyer. The proposed new system won’t encourage the adoption of low carbon vehicles in the important second-hand market. In the longer run it's also likely to encourage drivers to keep higher carbon emitting vehicles on the road and will also have impacts on residual values.”
"The zero VED for zero tailpipe emissions, rating provides an incentive for battery electric vehicles but immediately stepping up to £140 provides little to encourage the use of plug-in hybrid or other promising low carbon vehicle and fuel technologies, all of which have a role in decarbonising our transport while providing the choice needed for users disparate journeys”
"Considering the continuation of low pump prices, the LowCVP is surprised that the Chancellor did not take the opportunity to review fuel duty rates and the opportunities for support to lower carbon fuels which can benefit the whole vehicle parc. Overall fuel costs are an important incentive for motorists to adopt more low carbon and fuel efficient vehicles."
The LowCVP is also concerned that penalising premium vehicles (which is where new technology and innovation is often introduced) may slow the introduction of some lower carbon options.
Both of the leadiing, mainstream motoring organisations, the RAC and the AA, have expressed concern about the proposed Budget changes to VED. (RAC link here and AA comment via BBC link here.)
The LowCVP is developing a detailed response, but believes in the principle of long-term vision of progressive motoring taxation which rewards early introduction by manufacturers and uptake by motorists, of lower carbon options.
In a further announcement in Summer Budget 2015, the Chancellor announced a £100 million injection into autonomous and connected car research, development and testing. The government funding is to be matched by industry.
Related Links
< Back to news list