Motor industry urges caution in pre-Budget report

29 October 2003 #SMMT News

Motor industry’s pre-Budget report submission


  • No further changes to company car taxation


  • Greater duty incentives for ‘greener’ fuels


  • No increase to Vehicle Excise Duty


  • No increase in business taxes

In a submission today to HM Treasury, ahead of the Chancellor’s pre-Budget report in December, the motor industry sounded a word of caution to Rt Hon Gordon Brown MP.

Amid growing reports of the rising costs of motoring and the importance of reduced CO2 emissions, The Society of Motor Manufacturers and Traders (SMMT) urged the Chancellor not to de-stabilise the trend towards cleaner cars by over-taxing the motorist in the upcoming report.

‘The motor industry is committed to reducing CO2 emissions in line with environmental objectives, and has made tremendous progress in the development and introduction of new technologies. To be successful in the long-term, government must deliver clear incentives to motorists in order to increase the take-up of cleaner fuels and ‘greener’ technologies,’ commented SMMT chief executive Christopher Macgowan.

He added, ‘There is a danger of undermining the progress that has been made in reducing average car emissions by attempting to increase revenue. Government should allow the new tax systems to be properly evaluated before further changes are made.’

SMMT, which represents more than 600 companies in the automotive sector, identified the following issues for consideration by the Chancellor in his pre-Budget report.

Company Car Taxation The CO2 based company car tax system has been subject to continuous reductions in its banding and minimum level, down to 140g/km CO2 by 2005/6. This shift has had a significant impact on the motorist’s choice of business cars with a surge in diesel engines and superminis. Further reductions could undermine these gains by forcing more drivers to opt out of company schemes and choose older, less efficient vehicles instead. Government should refrain from further changes until the Inland Revenue has completed a full evaluation of the system.

Fuel Duties To encourage the take-up and availability of zero-sulphur fuels, government must increase its duty differential of 0.5 pence/litre for zero sulphur fuels. The wider use of zero sulphur fuels would improve fuel efficiency, reduce CO2 emissions and allow for the introduction of new technologies. However, greater incentives are needed to encourage widespread public use.

Vehicle Excise Duty (VED) Since the introduction of the graduated VED system in March 2001, average new car CO2 emissions have fallen by 3.5 per cent. The message to motorists is clear and the market is on course to meet government’s 2012 emission targets. Further changes will be an unnecessary burden on the motorist.

First Registration Fees The motor industry remains firmly against the DVLA’s plans to hike first registration fees by 52 per cent to £38 per vehicle. The proposed increase will be covering the estimated 1.75 million vehicles that remain unlicensed each year by targeting consumers, fleets and vehicle manufacturers.

UK manufacturing Economic stability is currently keeping domestic demand for new cars high, compensating for previously increased business taxes. As the market cools through 2004, this benefit will be eroded and the UK automotive sector will face fierce competition. SMMT is committed to highlighting the need to stop any further business tax increases and regulatory burdens that would threaten the UK’s position as a competitive base in the global economy.


Notes to Editors:

  1. The principal aim of government’s Powering Future Vehicles Strategy is to see 10 per cent of all new cars registered in the UK emitting 100g/km of CO2 or less by 2012.


  2. Registrations of diesel-engine cars have risen 4.2 percentage points since the introduction of the CO2 based company car tax system in April 2002. In the same time, registrations of superminis have risen 2.1 percentage points.


  3. A full copy of the submission can be seen at


  4. An official date for the pre-Budget report has not been set although it is expected to be issued in the first week of December 2003.



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