How will the Budget affect the motorist?

Posted on July 8th, 2015 by Rob Marshall

We explore how the first Tory Budget in almost 20 years will affect the motorist

With the Chancellor completing the Conservative Party’s first independent budget since 1996, in what has been billed “The most significant in recent times”, GEM focuses on how this afternoon’s speech will affect the motorist.

Fuel Duty
The most obvious political hot-potato has been frozen for the rest of the year.

Insurance and running costs
No VAT rises also mean (in theory) that typical motor expenses, where VAT is payable, are less likely to increase, such as parts bills, garage costs, et al. However, the Insurance Premium Tax (IPT) rise, to 9.5% from November, could mean an increase in many motor insurance premiums.

The Chancellor is also consulting on extending the time in which a car has to be examined for its first MoT Test, from three to four years, saving motorists over £100m per year collectively. However, this has an obvious safety implication, about which I shall blog later.

Car tax and roads investment (VED)
The most notable change involves car tax (Vehicle Excise Duty – VED). After hearing his announcements on the issue, we were left wondering if the Chancellor read our blog that highlighted a system that even he described today as both unfair and unsustainable.

By 2017, he revealed that over 75% of new cars would pay no VED in their first year spent on the road (including some of the most expensive models available, as our earlier blog highlighted).
The Chancellor stated that, if one can afford a new car, one can pay VED. After all, second-hand cars (which tend to be owned by people unable, or unwilling, to buy a new car) tend to pay higher VED rates, which the Chancellor concurred is a regressive policy.

From 2017, fresh VED bands will be introduced for new cars in their first year, which will be set according to emissions, updated for new technology. No doubt, more information on this will follow soon. Thereafter, there will be three bands, which simplify the current system considerably: ‘Zero Emission’, ‘Standard’ (costing £140 per year, covering 95% of vehicles sold), and ‘Premium’. There will be no changes to VED rates for existing passenger cars, on the road already.

The Chancellor acknowledged that four out of every five UK journeys are made by road, yet, he stated that the UK ranks behind Namibia and Puerto Rico in the quality of our network. He stated that the moves will stabilise the falling revenues from VED but the Chancellor will reverse Winston Churchill’s move and allocate the monies collected from VED directly to the roads, rather than it swelling the general taxation pot. There was no comment whether, or not, this would raise total expenditure on the network.

A New Road Fund, paid for by VED, will be collected in England to spend on English roads. Devolved administrations will be consulted on how this will work in those areas.

With lots of other important announcements raised, the motorist certainly was not forgotten but more clarification will follow, as the fine-print of today’s announcements are scrutinised.