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)|
|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
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
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 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.
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.
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.
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
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 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