SMMT response to Budget 2002

17 April 2002 #SMMT News

Detailed motor industry comment on specific items in the


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


  • 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


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.

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