Budget: Fleet industry reacts to Chancellor’s tax plans

The fleet industry and wider automotive sector has welcomed the fuel duty freeze, announced in the Budget, but criticised the Government for including nothing around electric vehicle (EV) infrastructure.

The Chancellor has frozen fuel duty and maintained the 5 pence per litre (ppl) cut, introduced last year, for a further 12 months.

He also announced a replacement for the super deduction, which was introduced in 2021, with fleet operators buying vans and trucks able to benefit from a new policy of ‘full expensing’. 

However, there was nothing from the Chancellor around electric vehicle (EV) infrastructure, disappointing many in the fleet sector.

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Industry reaction

Paul Hollick, chair of the Association of Fleet Professionals (AFP), would have liked to have seen measures announced ranging from the creation of an EV charging regulator through to national co-ordination on clean air zones, as outlined in our recent tax and regulation manifesto.

However, he said: "There was little content that showed the Government has been thinking about business road transport.

“The one bright point for fleets was the freeze in fuel duty. An increase in 11 pence per litre would’ve been extremely unwelcome at a point in time when the economy is struggling and removing that possibility is very much welcome.

"Further positives are difficult to identify but a recognition that more people need to be encouraged back into the workforce, through pension changes and childcare measures, could potentially help to a degree in a fleet sector where recruitment remains an issue.”

Karl Howkins, managing director of Sogo, said: “As a country, we’ve set ambitious goals to stop the sale of ICE vehicles by 2035. Sogo is doing its bit by helping fleets access the latest EV vehicles flexibly, but the Government needs to support a step change investment to ensure the pace of adoption doesn’t slow.

“The current positive tax regime for EVs should be extended to hasten the mass adoption of EV technology, and further incentives should be given to support the public charging infrastructure on the nation’s highways.

“There will be bumps in the road ahead, and we should not take the current pace of EV adoption as a given.”

Nick Williams, transport managing director at Lloyds Banking Group, said: “It’s disappointing that today’s statement from the Chancellor announced no new support to strengthen the UK’s electric vehicle charging infrastructure.

“It remains impressive that electric vehicles are entering the roads at record rates, but to meet this growing demand we need a charging network that can deliver, both in terms of availability and reliability. To achieve this, rapid expansion will be key.

“With the upcoming Zero Emissions Vehicle mandate also incentivising manufactures to bring more electric vehicles to the UK market, the call for an expanded charging network will be even greater, so the lack of support in today’s Statement is a big setback.

“We’re hopeful that the Government will reveal more plans ahead of its implementation next year, or we risk impacting the longer-term uptake of electric vehicles as confidence in our country’s infrastructure waivers.”

Philip Nothard, chair at the Vehicle Remarketing Association (VRA), said: “The freeze in fuel duty and additional help for potholes are both welcome while the childcare and pension measures designed to get people back into the workforce are good ideas which, given the labour shortages that we are seeing across remarketing, may have a positive effect.”

He added: “We have been highlighting the need for some form of support in the used market for electric vehicles and there was no news in that area today, but we remain hopeful that the Government are listening to the points we are making and will take action relatively soon.

“This is something that is very much needed to ensure the smooth electrification of the used EV sector.”

Mike Palmer, client development director at Nexus Vehicle Rental, welcomed the freeze in fuel duty, especially as businesses grapple with rising costs.

“Aside from fuel duty, it was reported in February that businesses have seen total vehicle operating costs rise 12.6%, and in November 2022, it was forecast that drivers could see a significant jump of 12p a litre at the pump which, combined with other rising costs, could have become catastrophic for businesses operating fleets,” he said.

“In a time of such economic uncertainty, the continued freeze on fuel duty will in part help to alleviate the pressures of rising costs amongst businesses and drivers.

“We are also encouraged to see that an extra £200 million investment into pothole repairs has been confirmed by the Chancellor.

“Potholes cause significant damage to vehicles and can greatly impact businesses financially. To see that this problem will be addressed is a positive result for businesses and fleets alike.”

Despite the Government previously signposting for a greener future however, given the approaching ban on petrol and diesel vehicles in 2030, Palmer said it was surprising that there was yet again no mention of additional measures to support the transition to EVs.

“Whilst the Government has made noise about commitments to the 2050 net-zero goal, there does not appear to be much action to ensure that the infrastructure is in place in the UK.

“There were more than 690,000 battery electric cars registered by the end of February 2023, yet the current infrastructure to support this growth does not match.

“The Government need a plan to build more charging points, otherwise the goal of a net-zero targets by 2050 looks increasingly unlikely, as does the 2030 ban on the sale of petrol cars.

“We would have liked to see the Government set out an updated plan to ensure that infrastructure and the charging network is fit for purpose across the UK to support businesses looking to transition to electric at this time.”

Jon Lawes, managing director of Novuna Vehicle Solutions, said: "The fuel duty freeze and continued 5ppl reduction will be critical in assisting the growth of business fleets across the UK.

“Without this action from the Chancellor today, fleet businesses would have faced significant operating costs this spring.

"The decision not to lower the VAT on public electric vehicle (EV) chargers or improve EV infrastructure, on the other hand, is disappointing.

“A VAT cut would level the playing field for those who are unable to charge their vehicles at home due to a lack of off-street parking or an inability to install a home charge point.

“Furthermore, with the current number of public charging stations unable to meet EV demand, implementing a plan to increase public chargers could have aided in overcoming some of the EV industry's challenges.

“The Chancellor should have taken more direct action on EV infrastructure today. The current system is unfit for 2030 goals and the industry has once again been left without a clear direction.”

Welcoming the freeze in fuel duty, Jack Cousens, the AA’s head of roads policy, said: “We are pleased the Chancellor has listened to the AA and frozen fuel duty.

“Not only will this save drivers ‘heavy duty’ pain at the pump, but will help keep the price of goods and services down as they are mainly transported by road. Crippling road fuel costs are also a major driver of inflation.”

On the extra £200m to fix potholes, Cousens said: “An additional £200m to fix potholes is welcome, but we are concerned that the cash won’t become available until next year.

“Years of underinvestment in our road network coupled with a cold and wet winter is already unveiling the craters.

“More money needs to be spent now, as well as significant long-term investment to improve our local roads.”

Seb Goldin, CEO of Red Corporate Driver Training, also welcomed the Chancellor’s decision to freeze fuel duty and maintain the 5ppl cut introduced last year.

However, he said: “Fuel remains at a high level – diesel is at an average of £1.67 per litre and unleaded at £1.47. A year ago, diesel was around £1.50 a litre and petrol £1.44.

“This highlights the importance of ekeing out every mile from a tank of fuel, which means ensuring drivers are trained to drive in a smooth, sympathetic manner which also has the benefit of making them safer.”

Caroline Sandall-Mansergh, consultancy and channels development manager for Alphabet GB, said: “Despite professing a commitment to growth and building for the future, the notable absence of clear measures that support progress towards net-zero targets and enable businesses and consumers to prepare in good time for the 2030 ban on the sale of petrol and diesel vehicles is disappointing.

"Whilst demand for EVs continues to grow, with BEV forming 33% of Alphabet new car orders in the first two months of this year, Government incentives and further investment in charging infrastructure are crucial to maintaining adoption rates.

“We are moving away from the early EV adopter population who have transitioned because they can charge easily at home or have access to sufficient workplace charging.

"Now is the time to ramp up support for the wider population of drivers who are unable to charge at home. These drivers are currently faced with paying a significant premium to use the public charging network and the government has, yet again, failed to address inequity in the VAT treatment between home and public charging.

"Eliminating this disparity would not only have a huge impact for existing drivers, it’s also a very persuasive factor for those fleets and drivers who are yet to make the transition and are debating whether they switch to EVs now or wait for another renewal cycle."

She continued: “We of course welcome the Chancellor extending much-needed support that goes some way to help tackle rising mobility costs by freezing fuel duty and maintaining the Energy Price Guarantee for households.

"However, more needs to be done to keep sustainability on the agenda; adequate incentives must be provided and key infrastructure projects accelerated in order to drive decarbonisation and electrification forward.

“And while it's good to see the Government has acknowledged the need to encourage ongoing business investment by announcing a successor to the super deduction, the new three-year full expensing policy remains limited in scope.

"We, like many in the industry, wanted the Government to expand the provision and enable more businesses to benefit from this type of tax relief with the inclusion of cars and leased vehicles. This was a prime opportunity to broaden support that has sadly been missed.”

Matthew Walters, head of consultancy services and customer value at LeasePlan UK, welcomed the freeze on fuel duty. "Even though the future of motoring – and of motoring taxation – is electric, this is not the time to hammer the millions of people and businesses who rely on petrol and diesel vehicles and already face high costs elsewhere,” he said.

 "We know that electric vehicles (EVs) offer numerous savings for fleets and motorists, from lower maintenance bills to multiple tax advantages. However, the rising price of energy has curtailed one of the best savings – the low cost of the electricity itself compared to petrol and diesel.

“Thankfully, that energy is becoming cheaper again – as highlighted by the Office for Budget Responsibility (OBR) in its supplementary documentation. And the Budget also confirms that the government is keeping its domestic Energy Price Guarantee (EPG) at £2,500 a year for an additional three months, until June. This is a tremendous boon for EV drivers.

“However, it is also worth noting that – despite the protestations of many fleets and motorists – the government is still charging 20% VAT on electricity from public charge points. The Chancellor should prioritise bringing this down to 5%, as it is for domestic charging.” 

He continued: “Last November, in his Autumn Statement, Jeremy Hunt announced significant changes to the Vehicle Excise Duty (VED) system for cars: as of 2025, EVs won’t just have to pay VED for the first time; they will also face the additional rate for vehicles worth over £40,000.

“Given that EVs tend to have higher sticker prices than their fossil-fuelled counterparts, this threatens to be a hefty new tax for electric motorists – and potentially even a disincentive for motorists to go electric in the first place.

“We hoped to see action in the Budget to limit this impact. Indeed, we have made representations to the Department for Transport (DfT) to have the additional rate apply to only the most expensive 20% of EVs. 

“Sadly, no such action was taken today. Practically the only mention of VED in the Red Book is to confirm that the main rates will increase in line with the RPI measure of inflation in April – which is currently at historically high, double-digit levels.

“If this Government really is serious about Net Zero, then it needs to rethink this policy well before 2025.” 

Walters also said that the absence of anything from the Government around the future of road taxes was disappointing.

“The Chancellor faces quite a predicament. In the years ahead, the welcome transition to EVs will cost him and his successors £billions in lost Fuel Duty revenues," he explained. 

“There has been much speculation that he’d respond to this situation by moving towards another form of motoring taxation. But the long-expected consultation into the feasibility of Road Pricing still hasn’t materialised – not even in today’s Budget.

“This is dismaying for two reasons. The first: if the biggest shake-up of motoring taxation in generations is going to happen ahead of 2030 – as it surely must – then it will need years of careful development and implementation. There is no real cause to delay that process now.   

“The other reason is that there’s now an increasingly long list of legislation or potential legislation that we’re still waiting for – from the necessary detail on the ZEV Mandate for manufacturers to a new system of VED for vans. Fleets and motorists need clarity on these and other issues to properly plan for the future.”