SMMT response to Budget 2000

Vehicle Excise Duty

The current VED system has been frozen until March 2001 when the following changes will take place:

·Reduced rate from standard £155 charge to £105 for all existing vehicles under 1200cc.
·New four-band VED system for all new cars, based on carbon dioxide (CO2) emissions. Within each band there will be a £10 discount for cars using cleaner fuels and technology. A £10 penalty will also be imposed within each band for diesel vehicles.

SMMT reaction

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The rates at which the scheme is due to be introduced and the suggestion that improvements in emissions performance will be recognised are welcome. However, the inclusion of a diesel penalty remains a concern for SMMT. The new system may lead to market confusion and the full implications of this system remain unclear. Therefore, SMMT welcomes the Chancellor’s decision to delay its introduction until March 2001.

Company Car Tax

The Chancellor announced major reforms of company car tax would be introduced from 6 April 2002. The reforms will:

·Base the tax charge on a percentage of the car’s price graduated according to its carbon dioxide emissions. The charge will build up from 15 per cent of the car’s price, for cars emitting 165 grams per kilometre (g/km) CO2, in one per cent steps for every additional 5g/km over 165g/km. The maximum charge will be on 35 per cent of the car’s price.

·Abolish existing business mileage discounts when the new system starts. Age-related discounts, which provide an incentive to keep older, more polluting cars,
will be abolished at the same time.

·Subject diesel cars to a three per cent supplement. This will not take the maximum charge above the current limit of 35 per cent of the car’s price.

·The qualifying level of CO2 emissions will gradually be reduced over the first few years of the reform, reflecting anticipated improvements in the fuel efficiency of new cars. The level of CO2 emissions qualifying for the minimum charge will be as follows:

2002-03 165g/km CO2
2003-04 155g/km CO2
2004-05 145g/km CO2

SMMT reaction

The planned reforms of company car tax could have a very significant impact on the market. Drivers who under the current system receive the full business mileage discount could find themselves with a very substantial tax increase for no published reason. The Inland Revenue has failed to provide an economic and environmental assessment of the planned changes.

Fuel Duty

·Fuel charges rise by 2p per litre
·Ultra low sulphur petrol to be set at 1p below other fuels from 1 October 2000

SMMT reaction

Britain’s 31 million drivers still face the highest level of fuel taxation in Europe, and the news that fuel costs will rise another two pence per litre is not good news. SMMT welcomes the end of the end of the automatic Fuel Duty Escalator, which was an unjustified and anti-competitive tax. However, with the price of oil rising rapidly, even the limited increases announced by the Chancellor will impact on industry’s competitiveness.

Climate Change Levy

The Chancellor announced further revision to the climate change levy. These included:

·A lower rate of levy for Liquefied Petroleum Gas, in recognition of its use in rural areas.
·The adding of pipe insulation, refrigeration equipment and thermal screens to the proposed list of technologies qualifying for enhanced capital allowances.
·The setting aside of £50 million for measures to help the horticulture sector.
·The introduction of a transitional 50 per cent discount on the levy for horticulture firms.

SMMT reaction

The SMMT is disappointed that the Treasury has not broadened the qualifying criteria for a climate change levy discount. The levy will have a substantial impact on the costs of many small and medium size enterprises.

Commercial Vehicles

·VED rates for 38 and 41 tonne commercial vehicles cut by £500.
·VED rates for 40 tonne commercial vehicles cut by £1800
·VED rates for all other CVs frozen.
·From 1 January 2001, six-axle lorries that meet Euro II emissions standards at 44 tonnes will be permitted for general use in the UK.

SMMT reaction

SMMT welcomes the Chancellor’s initiative to freeze and lower VED rates for commercial vehicles (CVs), after the significant rises in truck VED announced in last year’s Budget. Despite these changes, there is still a long way to go as British CVs still pay by far the highest VED rates in Europe. For example, a French 40 tonne five-axle vehicle pays just £450 road tax, compared with £3,950 in Britain – a difference of £3,500. The SMMT also welcomes the Government’s decision to introduce six-axle combinations, as it will help reduce the environmental impact of essential freight traffic.