The main surprise in George Osborne’s March Budget regarding fleet cars was a 1p per litre reduction in fuel duty – which was brought in immediately. The scrapping of the fuel duty escalator effectively for the period of Parliament was signalled in advance and inflationary increases to fuel duty were deferred until January 2012.
Also mooted before the Budget was the introduction of a fuel stabiliser.
“We are still waiting to see exactly how that pans out,” says Chris Chandler, principal consultant for Lex Autolease. “So long as the price of a barrel of crude oil exceeds $75 (£46), there will be no change in duty but if it falls below, duty may be increased to stabilise the price.”
The 1p reduction in fuel duty may not sound a lot but according to calculations by Lex Autolease, for a typical fleet of 250 cars, it would save £3,084 a year; and with a fleet of 1,000, savings would reach £12,337.
So what has happened to the green agenda so strongly vaunted by Gordon Brown? Well, it has not gone away. The government has carried on where the old one left off and, in announcing car tax for 2013-14, it has continued the trend by reducing the emissions-based car tax threshold by 5g of CO2 per kilometre.
“This is in line with what happened before, though there is no steer as to 2014-15,” says Dan Rees, car consultant for Deloitte. “The British Vehicle Renting and Leasing Association has been calling for a clear three years in advance so people can choose a car in the confidence that the régime is not going to change dramatically [during ownership].”
Car tax based on emissions has been a “phenomenally successful” tax, as Rees puts it. It has not only encouraged drivers into more fuel-efficient vehicles, but has also caused manufacturers to bring down the average emissions in the fleet sector.
“One minister in the new government thought there was another 10 years of life left in this tax policy,” he says.
Electric cars fail to spark
The private fuel scale charge has gone up in line with inflation from £18,000 to £18,800, acting as a further deterrent against paid private mileage. However, authorised fuel rates (AFR) are under consideration. These allow businesses to reimburse company car drivers at a prescribed rate per mile, calculated according to engine size, and have traditionally been revised every six months.
“This will continue, but the government has announced that if fuel prices increase by five percent of the public rates, it will consider a price change because drivers have been penalised by fuel increases without changes to AFR,” says Rees.
Approved Mileage Allowance Payments have been raised from 40p to 45p – the first increase since 2002. This rate applies to people who drive their own vehicles for business purposes and is designed to cover depreciation, wear and tear, tax and national insurance.
Also in the interest of greener motoring is the government’s grant of £5,000 towards the cost of electric vehicles. In principle, this is an environmentally friendly policy but ALD’s Keith Allen is not convinced these vehicles are practical for fleets.
“There has been a lot of talk about electric cars, especially in mainland Europe, because they are dependent on clean, nuclear energy,” he says. “But no one understands what the value of an electric car will be in three years’ time, they only run for 100 miles before they need to be recharged and there are difficulties attached to that because rapid charging shortens the life of the battery.”
In addition, electric energy in the UK comes from fossil fuels, not from nuclear plants, so there is questionable environmental advantage.
The final word goes to Paul Jackson, managing director of mileage audit specialist TMC.
“As fuel prices have started to go up, I have noticed a reduction in traffic on the roads during the week, so companies must be trying to restrict vehicle use,” he says. “The government does not need to do anything – the price of fuel is addressing the CO2 issue for them.”
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