Budget 2020: the fuel duty freeze, changes red diesel rebate and what the statement means for drivers
Chancellor of the Exchequer Rishi Sunak has unveiled his first Budget, with announcements on everything from coronavirus contingencies to changes to National Insurance contributions.
As always, several areas of the Budget directly affect motorists, from direct running costs to the state of the nation’s roads so here’s what the 2020 Budget means for motorists
Fuel duty freeze
Among the key announcements relating to motorists was the decision to continue a freeze on fuel duty.
There had been speculation that Mr Sunak could end the existing freeze on duty, which would see it begin to rise in line with inflation. However, it has been frozen for the 11th year running, meaning that the duty - applied on top of VAT - will remain at 57.95p per litre for petrol and diesel. Duty on LPG remains at 31.61ppl.
Plug-in car grant
Mr Sunak also announced that he would be extending the plug-in car grant (PIGC) to encourage more drivers to switch to electric vehicles. The existing scheme, which offers a £3,500 contribution towards the purchase price of a new EV, was due to run out this year but has now been extended to the 2022/23 financial year.
Despite calls to reinstate the grant for plug-in hybrids, it will continue to only apply to pure electric vehicles.
Vehicle excise duty
Vehicle excise duty - or car tax -remains unchanged for most drivers. However, as part of a package of measures to make EVs more attractive and less expensive, electric cars will now be exempt from the “premium tax”. This applies to cars with a list price over £40,000 and adds a £320 per year supplement to the tax for five years from the second year after first registration.
In his Budget speech Mr Sunak said he wanted to ensure that drivers are never more than 30 miles from an EV rapid charging point. To help meet that target and encourage EV uptake he announced a £500 million fund to help support the roll-out of more rapid charging “hubs” around the country
Investment in roads
Mr Sunak announced the largest ever investment in England’s strategic road network. The £27 billion fund will be used for a series of major projects including dualling the A66 trans-Pennine route, building a new dual carriageway and tunnel on the A303 to carry traffic away from Stonehenge and building the Lower Thames Crossing.
He also said that £2.5bn will be made available to tackle potholes and resurface roads over the next five years.
While fuel costs and were largely left alone, the Chancellor did announce that he was ending tax relief on “red” diesel for most sectors, saying its users were “some of the biggest contributors to our air quality problem”.
The current system allows some businesses who operate “off-road” vehicles (such as construction firms) to pay far less duty than on regular diesel. From 2023 this rebate will be removed for most sectors, although agriculture, horticulture, pisciculture, forestry and rail will continue to be eligible for duty relief.
The freeze on fuel duty, extension of the plug-in car grant and investment in rapid charging infrastructure has been widely welcomed by industry observers.
Nicholas Lyes, the RAC’s head of policy said: “The Chancellor has chosen to give a boost to drivers of today’s vehicles with a fuel duty freeze while also investing in tomorrow.
“We welcome the freeze in fuel duty, which will be a relief to drivers. While the Chancellor might have been tempted to increase duty, the reality is that for millions this would have simply increased their everyday driving costs and done nothing to encourage them to switch to cleaner vehicles.
“We also welcome a commitment to extend the plug-in car grant, which will provide a real long-term boost for drivers who plan on changing their vehicle in the next couple of years but find the current up-front costs prohibitive.”
Seán Kemple, director of sales at Close Brothers Motor Finance, commented: “The Chancellor’s pledge to boost investment into zero-emission cars and rapid charging hubs will be pivotal for the motor industry. The UK cannot approach a blanket ban on petrol, diesel and hybrid cars without a network that supports such a seismic transition.”
However, Claire Haigh, chief executive of Greener Journeys, said: "We are extremely disappointed that the Chancellor missed this golden opportunity to end the freeze in fuel duty, especially given the sharp drop in the price of oil. As hosts of this year’s COP26 UN Climate Summit, the UK must show leadership on reducing greenhouse gas emissions. Ending the freeze in fuel duty would have sent a clear signal that the UK is serious about meeting its net zero target."
Mr Lyes also warned that the £2.5bn for pothole repairs might not be enough. He said: "What has been committed is simply not enough. The condition and maintenance of local roads continues to be a major concern for more than a third of drivers. However, £2.5bn over the course of five years may not by adequate, particularly if the UK is hit by extreme winter weather.”