Public sector organisations should look at well proven fleet solutions - such as shared pool car schemes – rather than simply cutting mileage rates, according to Alphabet.
Clive Buhagiar, head of public sector at Alphabet, warned that simply cutting mileage could prove to be a “knee-jerk reaction” which the organisation may later regret.
He uses the projected £600,000 North Lincolnshire Council plans to save by cutting its staff mileage rate from 52p a mile to the HMRC-approved level of 45p (reported in August 2012, read more here) as one example.
Buhagiar said: “I wonder if the management team are missing a trick here by not fully exploring alternatives which could achieve greater savings, while supporting their desire to remain responsible employers.”
He suggested a pool car scheme might be a better alternative.
“If we take the headline £600,000 saving and divide this by 7p per mile, this gives us the figure of 8,571,429 (the number of business miles reclaimed every year).
“If we multiply this mileage by 45 pence per mile (new rate), this gives us a cost of £3,857,143 fuel cost for their ‘grey fleet’, assuming this is over a three year cycle.
“If they had switched to a typical diesel pool car fleet (sub 1600cc), the HMRC rate is 12p per mile, giving a fuel cost of £1,028,570, based on 8,571,429 miles.
“If we then assume a £2,000 rental per year and base this on 100 cars, this comes to a total hire cost of £600,000 over three years.
“Assuming an insurance cost of £600 per car per year, this comes to £180,000 over three years, making the total cost of the pool car fleet over the period, £1,808,570.
“This gives us a saving of approximately £2 million over the ‘grey fleet’ choice every three years.”
However, were the council to opt for 100 diesel pool cars (as Buhagia suggests) each car would be doing 85,000 miles a year.
Among the other alternatives to the grey fleet that have been successful for councils are travel plans/a travel hierarchy whereby an employee ask a number of questions before using their own car such as whether they can hold a tele or video conference instead and whether they can use public transport or walk.
Daily rental has also proved a successful alternative (dependent on mileage) with some companies stipulating that above a certain mileage a journey must be carried out in a hire car rather than a private car.
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