Increase the cost burden and manufacturing could go east, motor industry warns chancellor

10 March 2006 #SMMT News

Higher taxes and more red tape could see more vehicle and component production moving to low-cost eastern European markets, threatening jobs and damaging the UK economy. The warning comes from SMMT, the motor industry body, in a budget submission to Chancellor Gordon Brown MP.

SMMT chief executive Christopher Macgowan said, ‘Government must not burden automotive manufacturing in the UK off the European map. Manufacturers must have the confidence to develop their operations and government must help us meet the competitiveness challenge. That means a light regulatory touch and an integrated approach to regulation in environmental and transport policy.’

The issue: Red tape and growing tax burden

Research by the British Chambers of Commerce forecasts a £50bn cost to UK business between now and 2011, through compliance with workplace, consumer protection and environmental regulations. Proposals to load the automotive sector even further, for example, by including surface transport in the EU Emissions Trading Scheme, must be avoided.

Better regulation principles are strongly supported by the industry. The number of European type approval directives alone has risen by 25 per cent in the last decade. Manufacturers are therefore anxious that major UK policy reviews in areas like pensions, energy and transport do not impose additional costs on industry.

The issue: Too much stick and not enough carrot

Stable tax systems, clear incentives and consumer information drive the market for cleaner, alternative-fuelled vehicles. However, since the collapse of Powershift more than a year ago, car makers and consumers have faced uncertainty and no grants; these are vital to kick-start the market for low carbon vehicles.

In addition, incentives for the early introduction of Euro 4 trucks were considered back in 2001. The industry has heard nothing since and urges the chancellor to act now.

Christopher Macgowan commented, ‘Government has to embrace the concept of incentives in driving the market for the cleanest vehicles. Beating car buyers and commercial vehicle customers with tax penalties, while ignoring incentives, is absolutely counter-productive.’

The issue: Cost pressures for motorists

As fuel costs rise for motorists and industry, stable VED rates for cars, vans and trucks become more important. In July 2005, SMMT and its members introduced the new car label tying VED rates to six colour-coded bands. Consumers should be given time to adjust to this system fully and government would be wise not to change the number of bands or increase VED for those already penalised through fuel taxation by choosing larger-engined vehicles.

Christopher Macgowan added, ‘We recognise the pressure for higher VED rates, but firmer action would ripple through the new and used market. The precise effect on the market is unclear, but any move to increase tax could affect the commercial basis for some to manufacture in the UK.’

The SMMT letter to the Chancellor can be downloaded below


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