Brown takes the easy road – Motor industry”s initial reaction to Budget 2003

Today’s Budget raised concerns within the motor industry that uncertainty over future fuel and vehicle taxation could undermine the stability of the sector.

SMMT welcomed the expansion of research and development (R&D) tax credits but urged the Chancellor to clarify his plans for company car tax, VED and alternative fuel incentives in the long term.

The tightening of company car tax bands in 2005/6 has been announced before the full effects of the new system have been evaluated. Government plans for future changes must be subject to thorough consultation with industry. Failure to do so could deter business and fleet registrations, reducing domestic demand in the new car market.

The new lower band for VED is a positive incentive for ‘cleaner’ vehicles. The industry welcomes the introduction of fuel duty cuts for zero sulphur fuel but is disappointed that this will not come into effect until September 2004. Government must commit to a stable regime for fuel duties over a longer period.

Commenting on the 2003 Budget, SMMT chief executive Christopher Macgowan said, ‘Today’s Budget did not deliver a big boost for the industry. While R&D tax benefits have been welcomed, the Budget has not provided future transparency for key vehicle taxes. Government must commit to a long term regime for ‘cleaner’ fuel incentives, company car tax and VED to allow manufacturers to plan the introduction of new vehicle technologies.’

Notes to editor

1. The UK motor industry is worth £44.1 billion a year, contributes 3.5% to UK GDP and supports around 827,000 jobs. (Source – Third SMMT annual sustainability report)

2. Britain’s automotive sector raised over £41.6 billion for the Chancellor in 2001.

3. In 1997, the Chancellor raised £33.6 billion in taxes from motorists. This rose to £42.6 billion in 2003, an annual average growth rate of 4 per cent. The annual average RPIX of inflation over the same period was 2.4 per cent.