Budget for commercial motorists – Analysis of Pros v Cons

On Wednesday George Osborne announced the first Conservative budget for nearly 20 years. The implications were far reaching.
Much of the attention has focused on announcements regarding the introduction of a “living wage”, reductions in corporation tax and changes to child welfare payments.
Now that the dust has settled we thought we’d analyse the implications for commercial motorists.
 

Budget Motoring Pros

• Fuel duty frozen – Although the UK’s fuel duty remains the highest in Europe the continuation of the freeze that begun in 2011 is welcome news for anyone involved in the transport industry.

• A major fund for new road building and maintenance works – Hauliers and other professional road users will gladly back this much needed investment to help ease the pressure the UK’s clogged up roads and motorways. The Chancellor was right to highlight that in the last 25 years France has built over 2,000 miles of roads compared to the UK’s 300. The funds are coming directly from motorist’s Vehicle Exercise Duty (VED) and fingers crossed the works are instigated sooner rather than later.

• New VED bands for cars to be introduced from 2017 – from this point onwards there will be three duty bands – zero emission, standard and premium. The standard cars band will cover 95% of all cars sold in the UK and the amount will be £140 per year. The average motorist will save £26 off the £166 that they currently pay. Good news for most commercial motorists, especially for company fleet operators.Other changes also mean that only in the first year will a brand new car’s VED be set according to its emission levels. However, it’s not great news for any private hire drivers/ fleets operators who might have been considering purchasing vehicles such as the Toyota Yaris – which previously would have been exempt from any duty due to their low C02 emissions.Also the VED costs are even greater for all vehicles (including 0 emission vehicles) worth over £40,000 and vehicles with higher CO2 outputs. This could throw a spanner in the works for our motor trade clients involved in car sales that focus on selling sports or luxury premium brand vehicles. It’s worth noting that these changes will not apply to vehicles currently registered. Changes will only apply to new cars registered from April 2017 onwards.

• New car MOT exemption period increased to 4 from 3 years – the Chancellor believes that with the increasing reliability of modern cars extending the MOT exemption period is merited and he claims the change will save motorists billions. Commercial motorists doing high mileage will still need to regularly service and maintain their vehicles but at least they will a year’s worth of MOT costs. However on first glance, this probably isn’t great news for our many motor trade insurance clients that run MOT stations – but at least they may see an increase in job requests for roadside recovery.

• Legislation to regulate corrupt Claims Management Companies (CMCs) – the Insurance Fraud Bureau (IFB) have trumpeted this announcement. Last year alone they received 400 intelligence reports of corrupt CMCs instigating fraudulent claims. These practices only serve to drive up costs for honest motorists and tackling the issue needs to be prioritised.

Budget Motoring Cons

• A 3.5% increase in I.P.T. to 9.5% – This will impact 9.6 million motorists. So for example: a £1000 premium (not uncommon for commercial motorists) an additional £35 will be levied.

Budget Conclusions

The Chancellor has given with one hand and has taken with another. The severity of the increase in I.P.T. probably outweighs all the points on the much longer list of pros.

It appears the “Summer Budget 2015” will be viewed as mixed bag for commercial motorists and business owners who rely on having their vehicles on the road.