SMMT response to Budget 2001

03 July 2000 #SMMT News

Fuel duty Commitments made by the Chancellor in his Pre-Budget

Report were confirmed in the Budget with cuts to both ultra-low sulphur petrol

and diesel. The duty rate on unleaded petrol was also cut by two pence per litre

until 14 June 2001. By this time oil companies have indicated that ultra-low

sulphur petrol will be available across the country.

Fuel type Old Duty Rate (pence per litre) New Duty Rate (pence per litre) Reduction (pence per litre duty and VAT)
Unleaded petrol 48.82 46.82 2.35
Ultra low sulphur petrol 47.82 45.82 2.35
Lead replacement petrol 50.89 48.89 2.35
Ultra-low sulphur diesel 48.82 45.82 3.52
Road Fuel Gases (LPG and CNG) 15 pence per kg 9 pence per kg 7.05 pence per kg


As part of the Green Fuels Challenge, duty on road fuel gas

will be cut by six pence per kg, frozen until 2004. The Chancellor also promised


  • Finalise pilot projects for bioethanol, biogas, methanol

    and hydrogen during the year

  • Consult biodiesel producers and car makers in advance of

    Budget 2002

SMMT reaction

The cuts in fuel duty for ultra-low sulphur petrol and

diesel, as well as road fuel gases represents good news for motorists and hauliers.

It also marks further steps by Government to provide incentives for cleaner

fuels and technologies.

Vehicle Excise Duty – cars

The Chancellor confirmed that the reduced rate of VED for cars

with small engines would be extended to include those up to 1549cc from 1 July

2001. The extension of the small car engine VED rate would be backdated to 1

November 2000.

Owners of cars between 1200cc and 1549cc who had purchased

or would purchase a VED disc between 1 November 2000 and 30 June 2001 are eligible

for a rebate of up to £55 for each annual licence purchased, or £27.50 for each

six-month licence. The DVLA has undertaken to contact eligible motorists in

July 2001. All other car, motorbike and bus VED rates were frozen.

From 1 March this year, all new cars registered in the UK pay

vehicle excise duty (VED) according to the amount of carbon dioxide their car

emits. There are four new car VED rates ranging from £90 to £160. The DETR estimates

that up to 70 per cent of cars registering under the new system will pay less

VED than before.

SMMT reaction

SMMT remains concerned about the full implications of

a new four-band VED system based on CO2 emissions, particularly as it will run

alongside the existing system for cars registered before 1 March this year based

on engine size. There is a huge potential for confusion in the market place

as consumers struggle to identify what the new bands mean. All consumers need

to be fully aware of the aims behind the new scheme and the effect of choosing

a more environmentally friendly new car could have on running costs.

Commercial vehicles

Gordon Brown today swept away more than 100 different truck

tax bands and replaced them with a system of seven broad rate bands. This will

improve environmental performance and simplify the system for hauliers.

Truck tax will be cut by over £300m a year compared to last

year’s rates, bringing the UK down to among the lowest in Europe for the cleanest

trucks. These new rates will come into force on 1 December 2001.

The temporary truck tax rates introduced on 1 December 2000

will run till 1 December 2001.

The Government claimed it has paid out more than £210m to over

120,000 hauliers in the form of truck tax rebates since last December. This

has cut effective tax rates by up to 50 per cent for most hauliers.

Since the Pre-Budget Report, the Government has consulted on

ways to reform truck tax. The new system announced today is based largely on

the ideas in the Government’s consultation document.

Gordon Brown also said he wanted to go further to improve the

environmental performance. He wants lower tax rates for trucks meeting the latest

Euro 4 emission standards. These would apply from around 2004. The Reduced Pollution

Scheme will be reviewed to see if it still offers any benefits.

The Government also said it would look at the ways of paying

truck tax, to see how they could be simplified.

Modernisation fund

Mr Brown announced a £100 million Haulage Modernisation Fund

in the Pre-Budget Report. Since then the Road Haulage Forum discussed how to

use the money. As a result, in England, the Government will give up to:

  • £30 million for targeted support to retrofit older trucks

    running in areas of poor air quality, where nitrogen oxide and particulate

    emissions are most damaging. This cash will help hauliers qualify for up to

    £500 lower tax rates

  • £15 million for advice on fuel efficiency, which should

    deliver savings of five to 10 per cent in carbon emissions and similar cuts

    in the typical haulier’s fuel bill

  • £5m for training new drivers to help the industry meet new

    skills and manpower needs

  • £3 million to increase Government enforcement of haulage

    industry regulations across the UK, at the industry’s request

  • £2 million for some supporting measures, including a pilot

    scheme for the industry’s own plans to raise standards and business performance.

The rest of the Haulage Modernisation Fund in England will

be used later when both the Government and the industry have a better idea of

future needs. The Government said it would continue to develop its plans to

set up a vignette system to penalise visiting trucks. These pay no UK road tax

although they can work freely in the UK.

SMMT reaction

The reform of truck tax has generally been welcomed by

the industry, although there remains concern about the significant increases

between some of the bands. The delay in the review of the reduced pollution

certificate scheme until 2004 is a disappointment. Road transport affects every

aspect of our economy, so anything which helps keeps costs down will help the

nation as a whole.

Research and Development

In the Pre-Budget Report, the Chancellor said that the Government

would be looking at measures to boost investment in R&D across business. Today

he confirmed that he would be setting out a consultation document, Increasing

Innovation, seeking views on tax incentives to encourage innovation.

The consultation paper outlines what would be involved in the

design of an incremental R&D tax credit incentive. Some of the things that need

to be considered include:

  • Eligibility criteria
  • Sub-contracted expenditure
  • The interaction with existing SME reliefs

SMMT reaction

The SMMT welcomes the publication of the consultation

on incentives for Research and Development tax credits to companies.

Climate Change Levy

The Chancellor confirmed that the Climate Change Levy comes

into effect on 1 April. Companies can get 100 per cent capital allowances on

a range of energy saving technologies.

SMMT reaction

SMMT is disappointed that the Chancellor failed to announce

a broadening of discount criteria for this new tax. The lack of action ensures

that the majority of companies in the automotive sector will face increased

energy costs in 2001. Productivity improvements and competitiveness will not

be helped by the additional tax burden, which will affect component suppliers

in particular.

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