Emergency Budget 2015: The leasing industry's view - updated

The Emergency Budget included a range of measure which will affect fleets and the leasing industry (Emergency Budget report).

Commenting on the announcement that fuel duty would be frozen for this year, BVRLA Chief Executive Gerry Keaney said:

“Motorists and businesses will benefit from this continued freeze, but there is now a compelling case for the government to go one-step further and provide a real stimulus to the UK economy by cutting fuel duty.”

The government’s decision to introduce new VED bands from 2017 for newly registered cars will help protect Exchequer revenues, which had been falling alongside average emissions. The Chancellor pledged that overall VED revenues would remain at current levels and that this income would be ring fenced for a new Roads Fund from 2020.

“Although we welcome the commitment to maintain current VED revenues and invest the income on roads in the future, we are concerned that the existence of two different VED bandings from 2017 could create extra complexity and cost for the fleet market,” said Keaney.

“Cars are more reliable than ever, but extending the first MOT deadline could pose safety issues for cars that are doing high mileages and aren’t serviced regularly. There could be a case for developing a time and mileage-based criteria for the first MOT,” said Keaney.

“Vans are the fastest growing sector of the road transport sector and concerns over their first-MOT pass rate mean that the government did the right thing in excluding them from this proposal.”

Here leasing companies have their say:

Matthew Dyer, managing director of LeasePlan UK, said: “Only 112 days after the last Budget, Chancellor George Osborne has made another round of funding cuts.

"Echoing the statement made in March, the Chancellor was in a buoyant mood, stating that the economy was ‘fundamentally stronger than it was five years ago’.

“For the fleet industry, there was the expected and welcome freeze on fuel duty, some encouraging news on low emission vehicles, and the fact that no one will pay more tax for a car that they already own.

“What’s more, there was good news in terms of economic growth with news that the UK is one of the fastest growing economies in the developed world.

“The Office of Budget Responsibility revised its growth forecast again, saying the economy will grow 2.4% this year, 2.3% in 2016, before rising again to 2.4% in 2017, and for the rest of the decade.

“This growth is reflected in the most recent figures released by the Society of Motor Manufacturers and Traders (SMMT), which recorded the strongest six-month period to date. Fuelled by fleet growth, 1.3 million car registrations were recorded between January-June 2015 alone.”

 

Fuel duty

Matthew Dyer, managing director of LeasePlan UK, said: “Fuel duty was one of the Chancellor’s most reliant crowd-pleasers during the last Parliament. His promise to freeze fuel duty was welcomed by all.

“There is little doubt then that the Chancellor’s decision to uphold this promise in today’s Budget will be received gratefully by both the public and private sectors.

"While crude oil prices have meant that prices at the pumps have fallen to their lowest this decade, fuel costs remain a significant overhead for businesses and public sector bodies that operate vehicle fleets.”

Paul Lippitt, Principal Consultant at Lex Autolease, said: “It is pleasing to see that the fuel duty freeze planned for September will still go ahead.

"This should go some way to mitigate the impact on British businesses that are already burdened by some of the highest fuel prices in Europe.

"We would like to see the Government go even further and take steps to reduce fuel duty to ensure that firms are not priced off the road altogether.”

Jon Lawes, managing director of Hitachi Capital Vehicle Solutions, said: “We were pleased to hear the Chancellor kept his word from the last Budget, announcing fuel duty will remain frozen for 2015.”

 

Low emission vehicles

Matthew Dyer, managing director of LeasePlan UK, said:“Following the Supreme Court’s announcement earlier this year that the Government must do more to curb air pollution, and especially NO2 emissions, it is perhaps surprising that the Budget did not do more to encourage sustainable driving.

“Although the Vehicle Excise Duty announcement does address emissions directly, the Chancellor could have gone further to promote an even larger uptake of environmentally friendly vehicles, especially as the popularity of low emission vehicles has continued to accelerate, with registrations up 70.9% on last year (source: SMMT).”

Gary Killeen, Fleet Services commercial leader for GE Capital UK, said: "One further observation worth making about the new VED regime is that only in the first year of the vehicle’s life is there any direct financial incentive for buying a low carbon model, with a first year stepped scale ranging from nothing for a zero emissions vehicle through to £2,000 for one over 255g/km. Following that, there is a flat rate of £140 for each successive year.  It remains to be seen if this approach has an impact on the appeal of low emission cars in the used car market."

VED changes

Jon Lawes, managing director of Hitachi Capital Vehicle Solutions, said: “We welcome the introduction of the new Roads Fund to support the UK road network; however the method to feed this fund by the way of a new Vehicle Excise Duty will undoubtedly divide opinion.

“It was a question of when, not if, VED tax bands would change, with Osborne himself citing ‘three-quarters of new cars paying no VED by 2017’, a funding deficit that could not be ignored.

"We have expected changes to vehicle duty as we have seen with benefit-in-kind updates from previous Budgets, however it remains to be seen if the new simple three-tier system announced today will reflect the distribution of new vehicle registrations in the marketplace.

"For businesses, this will be an additional cost to consider over the coming years, but the news these funds are going back into the roads will be welcomed."

 

MOT changes

Jon Lawes, managing director of Hitachi Capital Vehicle Solutions, said: “Similarly, the extension of the first compulsory MOT test from three to four years will have an impact for employers and employees alike.

"Although many company cars may now fall out of requiring a MOT while on fleet, employers will need to take additional measures to ensure they remain compliant and uphold duty-of-care obligations."