Budget 2020: Fuel duty frozen and record cash for roads

The Chancellor says he will maintain the fuel duty freeze and spend billions on roads in a Budget dominated by measures to lessen the economic impact of Coronavirus.

Rishi Sunak warned MPs in the House of Commons that there would be a “significant but temporary disruption” to the UK economy but insisted "we will get through this together”.

The Bank of England had announced before the Budget yesterday (Wednesday, March 11), an emergency cut in interest rates from 0.75% to 0.25% in a bid to support the economy during the virus outbreak.

Sunak said: "We are doing everything we can to keep this country and our people healthy and financially secure." 

His announcement that the fuel duty freeze will continue for a further year, costing the Treasury some £800 million in lost revenue, was welcomed by the commercial fleet industry.

But measures announced on red diesel were not so warmly received. The Chancellor announced he will remove the entitlement to use red diesel from April 2022, except in agriculture, fish farming, rail and for non-commercial heating (including domestic heating).

By removing this tax relief on pollution, the Government says it will encourage businesses and industry to improve the energy efficiency of their vehicles and machinery or look for greener alternatives.

The development of these alternatives will be supported by the government more than doubling its investment in the Energy Innovation Programme.

Road Haulage Association (RHA) chief executive Richard Burnett said: “Of course, we welcome the freeze on fuel duty for the tenth year in a succession. However, the announcement that the tax relief on red diesel will be abolished in 2022 will come as a blow to the operators of refrigerated trailers.

"They’re the ones responsible for the movement of millions of tonnes of foodstuffs each year – both within the UK and to and from the European mainland.

“The Chancellor’s claim that this will not take effect for two years ‘giving businesses time to prepare’ is helpful but does not take account of the possibilities to use low emission or low carbon fuels.

"We shall be working with the Government and the sector to explore alternatives that support environmental objectives and the supply chain.”

Rosie Bailey, director of business development at CitySprint, was also pleased to see that the fuel duty freeze will continue.

But she also welcomed the introduction of new measures designed to help reduce emissions, protect the environment and encourage greater use of cleaner vehicles.

“The logistics industry has always understood its responsibility to reduce the impact of its operations on the environment,” she said.

“With the focus on urban congestion and air quality, we have long-called for further investment in the infrastructure needed to support greener vehicle types. So, the pledge that drivers will never be more than 30 miles from a rapid charging station, along with a reduction of taxes on zero emission vehicles, is great to see.”

The Government says that access to high quality, convenient charging infrastructure is critical for drivers to make the switch to electric vehicles confidently.

It has therefore announced £500 million over the next five years to support the rollout of a fast-charging network for electric vehicles, ensuring that drivers will never be further than 30 miles from a rapid charging station.

This will include a Rapid Charging Fund to help businesses with the cost of connecting fast charge points to the electricity grid.

To target spending from this fund effectively, the Office for Low Emission Vehicles will complete a comprehensive electric vehicle charging infrastructure review.

Simon King, director of sustainability and social mobility at Mitie, said: “As one of the largest private sector electric vehicle fleets in the UK, it’s gratifying that the Chancellor has heard our calls for improved rapid charge point infrastructure and financial reforms to support the electric car and van market.

“However, if we are to make the most of these commitments and rollout electric vehicles to every single Mitie driver, this investment must focus on areas where no off-street parking is available.

“We’re committed to achieving a fully electric fleet by 2025, but this will only be possible if businesses, vehicle manufacturers and policy makers continue to collaborate and solve challenges such as these.”

The Chancellor also announced that he would extend and maintain the plug-in grants for electric vans (up to £8,000) and large vans and trucks (up to £20,000) up until 2022-23.

Alan Barlow, director UK & Ireland at Centrica Business Solutions, said: “New funding to support the electric vehicle roll-out is a vital commitment from the Chancellor and should be welcome news for the many UK businesses seeking to electrify their fleets.

"Speaking to business leaders themselves, they clearly recognise the important operational role EVs play in meeting their decarbonisation goals but there is still concern over how to finance this significant change.

“While the measures announced today are another step forward on the path to mass adoption, businesses themselves must also start investing in a range of supporting technology if we are to see EVs become truly mainstream. 

"It’s our view that on-site generation from solar panels, allied with battery storage and smart charging is vital for firms installing EV charging infrastructure on-premises. 

"Not only will these technologies help firms to meet the additional energy demands of an electrified fleet independently of the grid, but through use of renewables, support overall carbon cutting and lower energy costs.”

In terms of infrastructure, the Government has announced the largest ever investment in England’s motorways and major A roads.

The second Road Investment Strategy (RIS2) will spend more £27bn between 2020 and 2025.

It will take forward schemes such as dualling the A66 Trans-Pennine and upgrading the A46 Newark bypass to address congestion, and building the Lower Thames Crossing to increase road capacity across the Thames east of London by 90%.

The Government is also investing £20m to develop the Midlands Rail Hub, progressing plans for a major programme of improvements to rail services across these regions.

The Budget also announces a new Potholes Fund that will provide £500m a year, resulting in a 50% increase to local road maintenance budgets in 2020-21.

Burnett said: “All road users will be pleased with the funding for more than 4,000 miles of road, as well as a £2.5bn pothole fund over five years - enough to fill 50 million potholes. While good news, this work must be undertaken as soon as possible.

“We’re just coming out of a long, wet winter. The better weather provides the perfect opportunity to get the roads fit for the job, rather than wait until the problems get worse as does the weather.”

Christopher Snelling, head of UK policy at the Freight Transport Association (FTA), added: “Businesses within the logistics sector rely on safe, effective and well-maintained road networks to keep goods moving across the UK, but the poor state of roads across the nation has compromised their ability to do so; the economic performance of the country has suffered as a result.

“Now, we are calling on government to press ahead urgently with its plans; the UK’s road and rail network has been subject to chronic underinvestment for many years and this programme is long overdue.”