Autumn Statement: Fuel duty to remain frozen

Against a backdrop of falling pump prices, the chancellor has said that fuel duty will continue to be frozen.

Making the announcement in today’s Autumn Statement, George Osborne’s decision not to increase fuel duty has been welcomed by the fleet industry.

David Bizley, chief engineer at the RAC, said: “The negative impact of fuel duty on economic growth is now acknowledged by the Treasury.

“With fuel duty already frozen until May 2015, we had feared an early return to the fuel duty escalator system – a deeply unpopular practice which led to a series of fuel duty hikes – but, for now, it appears that is not going to be the case.

“While we are currently enjoying low pump prices as a result of the lower world oil price this may change quickly, and it will be reassuring to fleet managers that the taxation scheme is not about to change.”

However, some think the chancellor has missed a trick in not cutting fuel duty rather than just keeping it frozen.

Andrew Hogsden, senior manager with Strategic Fleet Consultancy at Lex Autolease, said: “British businesses are burdened with some of the highest fuel prices in Europe.

“Reducing fuel duty would provide them with an immediate cashflow boost as they look to capitalise on the opportunities presented by the recovering economy. 

“Unfortunately the Government’s decision not to reduce fuel duty means they remain saddled with this costly overhead.” 

Hogsden disappointment was shared by the Road Haulage Association (RHA), which was hoping for a 3p per litre cut in fuel duty.

RHA chief executive Richard Burnett said: “A 3p per litre cut in duty would have gone some way to levelling the playing field between the UK and the rest of Europe.

“Today’s freeze means that as a result of today’s low oil price, fuel duty now accounts for nearly 70% of the price of a litre of fuel.”

Hogsden was also disappointed that the chancellor did not address plug-in-grants and electric vehicles.

“The financial incentive of a plug in grant has made electric vehicles more affordable for businesses and motorists in general,” he said.   

“Rather than remove this grant in 2017 or when vehicle sales reach 50,000, we would have preferred to see a phased reduction to ensure the fledgling electric vehicle industry is not damaged by a sudden drop in sales.”

He also highlighted how the lack of clarity around mileage reimbursement rates for electric vehicles is a barrier to more businesses adopting this technology. 

“Whether it’s a company car or a private car used for work purposes, companies need clarity and certainty regarding the costs incurred in running electric vehicles and HMRC’s treatment of those costs,” he said.

Osborne had already revealed some of the major announcements from today’s speech, including a £15 billion roads plan.

Simon Elliott, managing director of MAN Truck & Bus UK, welcomed Osborne’s infrastructure investment. He said: “The UK’s priority must be to invest in improved roads and inter-city links. We are pleased that Mr Osborne recognises this and we look forward to seeing how his proposals are rolled out.”

Elsewhere in the statement, it confirmed that from April 2015 the Government will provide a statutory exemption for trivial benefits in kind costing less than £50.

From April 2016, the Government will also remove the £8,500 threshold below which employees do not pay Income Tax on certain benefits in kind and replace it with new exemptions for carers and for ministers of religion.

It will also exempt certain reimbursed expenses and introduce a statutory framework for voluntary payrolling. The new exemption for reimbursed expenses will not be available if used in conjunction with salary sacrifice.

The Government will stop tax relief from being claimed on reimbursed business expenses when they are paid in conjunction with a salary sacrifice scheme.

Simon Oliphant, chief executive of Hitachi Capital Vehicle Solutions, concluded: “Today’s Autumn Statement focused on the future; maintaining economic recovery, in turn reducing the deficit and addressing the balance of power between the North and South of the country.

“Hitachi Capital Vehicle Solutions is pleased to hear an Autumn Statement that shows support for SMEs and to the infrastructure required for the country to prosper for generations to come.

“If the Government is to succeed in building a ‘Northern powerhouse’ and balancing power, they rightly need to invest in a network that supports this and continued growth.

“Road and rail are fundamental elements for the mobilisation of business and form key parts of the attraction for investment in the UK from overseas.”