Detailed motor industry comment on specific items in the
Budget
Fuel Duty
The rates of duty on road fuels and non-road fuel oils (such
as red diesel) were frozen by the chancellor, reducing duty on the main road
fuels in real terms by around one pence per litre. In line with the announcement
in the 2001 Budget, the government confirmed that a new rate of duty for biodiesel
of 25.82 pence per litre, 20 pence per litre below the ultra-low sulphur diesel
(ULSD) rate, would take effect from Royal Assent.
The chancellor also announced that, in 2003, the government
would introduce a duty incentive to encourage the production and use of sulphur-free
fuels. Subject to the outcome of a pilot project, the government also intends
to exempt hydrogen used as a road fuel from fuel duty for a limited period to
encourage its further development and early take-up.
SMMT position
The sector is pleased that fuel duty has been frozen
and welcomes the government’s advance warning of the introduction of incentives
for zero sulphur fuels. These fuels will help reduce tailpipe emissions from
the existing vehicle fleet and enable new and more fuel-efficient technologies
to be introduced.
Vehicle Excise Duty
The main rates of VED for trucks and cars will stay the same.
However, from May 2002, the government will introduce a new ‘AA’ VED band for
low carbon cars emitting up to 120g/km of carbon dioxide, first registered from
March 2001. The new rate cuts VED for these cars by £30, increasing the
incentive to choose the very cleanest cars.
In addition from March 2003, new vans that meet the new Euro
IV emissions standard would qualify for a reduced VED rate of £105.
SMMT position
The industry is pleased that the current rates of VED
remain broadly unchanged, and supports further VED cuts for the very lowest
CO2 emitting vehicles. However, there is concern that an incentive for Euro
IV vans was premature and would introduce an unnecessary complication to the
market place.
Truck Road User Charging
The Budget confirmed the government’s decision to introduce
a distance-based lorry road-user charge following its consultation launched
in the Pre-Budget Report. This was designed to make foreign lorry operators
pay towards the costs they impose in the UK. The chancellor stated that offsetting
tax reductions, so that costs for the UK haulage industry would not increase,
would complement the new charges. The government suggested the new charge would
be introduced in 2005 or 2006 and that the Treasury would consult shortly on
the details.
SMMT position
The industry looks forward to consultation on the proposals
which should level the playing field between UK haulage operators and their
European counterparts, and ensure that continental vehicles make a contribution
to the upkeep of British roads.
Enhanced capital allowances for low emission cars
From today, all businesses could claim 100 per cent enhanced
capital allowances on their investments in new cars emitting up to 120g/km of
carbon dioxide; and vehicle refuelling infrastructure for compressed natural
gas or hydrogen fuel. The government committed to review these allowances further
over time.
SMMT position
The industry welcomes these measures.
Free fuel for employees
From April 2003, the new fuel scale charge will be linked
to carbon dioxide emissions, including the same discounts and premiums as in
the company car tax system. There would also be a proportionate reduction if
an employee receiving free fuel chose to opt out part way through the year.
SMMT position
The industry supports the government’s moves to encourage
the growth of low emissions vehicles.
R&D Tax Credits
The government confirmed that it would introduce a new tax
credit to boost research and development undertaken by larger companies, complementing
that already available for SMEs. The new tax break would:
- be a simple volume credit based on the total amount of
research and development companies undertake;
- provide a 25 per cent rate of super-deduction for qualifying
R&D expenditure against taxable profits; and
- be granted to the company actually undertaking the R&D
so as to provide a deduction for all qualifying R&D undertaken in the
UK. To promote business links with academic research, companies that fund
research undertaken collaboratively with universities, charities and other
not-for-profit organisations would also qualify.
SMMT position
The SMMT supports the additional incentives announced
by the chancellor to encourage the take-up of cleaner vehicle technology and
the volume based R&D tax credit for larger companies. However, the industry
would like to see further incentives such as the removal of duty on fuel used
solely for R&D to encourage further investment in the UK.
Training Initiative
The Pre-Budget Report set out a vision for UK training and
skills and announced that pilot schemes would be launched to test different
approaches to help working people upgrade their skills and support employers
who needed more highly skilled staff. Budget 2002 announced further details:
- Employer Training Pilots would be operated by local Learning
and Skills Councils in Birmingham and Solihull, Derbyshire, Essex, Greater
Manchester, Tyne and Wear, and Wiltshire and Swindon from September 2002;
- The pilots would offer free basic skills and Level 2 courses
to low-skilled employees from participating firms, and would provide information,
advice and guidance to both individuals and their employers. Participating
firms would be asked to offer their low-skilled employees paid time off to
train.
- Participating employers would receive financial support
from their local Learning and Skills Council in recognition of the time taken
off to train by their low-skilled staff.
The government also wants to increase the take-up of Investors
in People (IiP) by small organisations. The Budget announced additional funding
of £30 million for the Learning and Skills Council to encourage small
organisations to reach the IiP standard.
SMMT position
Today’s announcement supports the motor industry’s commitment
to a sustainable future built upon sound environmental, economic and social
principles. Training is a key building block for future growth and this is good
news for UK plc.
Modernising Business Tax
The government announced a measure to modernise the taxation
of foreign companies operating in the UK through branches. Capital would be
attributed to a UK branch for tax purposes, based on the capital it would need
to trade if the branch were an independent, free-standing company. The government
suggested that this would bring the UK closer into line with established international
practice, ensuring a level playing field between foreign companies (mainly banks)
and their UK-based competitors. The government would be consulting on the technical
detail of the legislation.
SMMT position
The industry will look at these proposals in detail
and welcomes the government’s attempt to bring the UK into line with international
business practice.
Abandoned Vehicles
It was also announced, as part of the government’s crack down
on abandoned vehicles that the Finance Bill 2002 would include provisions for
a new offence to ensure that the registered keeper was liable for an unlicensed
vehicle.
SMMT position
The SMMT welcomes further steps taken by the Government to
tighten up on irresponsible owners who abandon their vehicles. This is the second
initiative launched in recent weeks and the industry welcomes moves to deal
with a minority that makes life so unpleasant for the majority of responsible
vehicle owners.
