UK Government Pre-Budget Report Offers Tax Exemptions for EVs, £30M in Additional Support for Low-Carbon Vehicles; Annual Fuel Tax Increases and End of Duty Differential for Biofuels
21 December 2009
In the Pre-Budget Report (PBR) released on 9 December, UK Chancellor Alistair Darling announced that all electric cars will be exempt from Company Car Tax (CCT) for 5 years and electric vans will be exempt from Van Benefit Charge (VBC) for the same period. A 100% first year tax allowance will also be provided for the purchase of electric vans subject to State Aid clearance. The PBR also has news of an additional £30 million (US$48.5 million) to support low carbon vehicle development, including an expansion of the Technology Strategy Board’s ultra-low carbon vehicles competition. (Earlier post.)
The Pre-Budget Report (PBR) is one of two wide-ranging economic reports presented to Parliament by the Chancellor each year. In spring the Chancellor presents the annual Budget statement, which includes a detailed assessment of the state of the economy and the nation’s finances. In his statement, the Chancellor may announce changes to taxes and new spending measures.
Since 1997, the Chancellor has also presented a Pre-Budget Statement along with a Pre-Budget Report in the autumn. The PBR provides a progress report on what the Government has achieved since the previous Budget, gives an updated assessment of the state of the economy and public finances, and sets out the direction of Government policy in the run up to the spring Budget.
The PBR can serve to launch a national debate on important economic issues, taxes and spending in advance of the spring Budget. The PBR may also launch public consultations on new policy proposals, or detailed analysis of a particular part of the economy or Government policy. This year’s PBR follows the first contraction in the global economy for 60 years. The Government has responded with a range of action to support households, businesses and the broader economy through the recession.
Other elements of the PBR to support lower-carbon transportation include:
The PBR 2009 confirms that—as announced at Budget 2009—fuel duty will increase by one penny per liter (US$0.06 per gallon US) in real terms on 1 April each year from 2010 to 2013.
As also announced in the 2008 Budget, the 20 pence per liter (US$1.21 per gallon US) duty differential for biofuels will cease from 1 April 2010, as the tax discount cannot distinguish between sustainable biofuels and those that increase greenhouse gas emissions or raise wider sustainability concerns. The 2009 Pre-Budget Report announces that the duty differential will continue for biofuels made from used cooking oils for two years.
Support for biofuels will continue through the Renewable Transport Fuel Obligation, which provides a guaranteed demand for biofuels, with a sharper environmental focus through its carbon and sustainability reporting criteria. To support the value of biofuel production, the price for “buying out” of the Obligation will increase to 30 pence per liter (US$1.83 per gallon US) from the 2010-11 obligation year.
The Chancellor confirmed that from 2012, the CO2 emissions thresholds for Company Car Tax (CCT) bands will be shifted down by 5g CO2 per km, and the graduated table of CCT bands will be extended downwards to a new 10% band for cars emitting up to 99g CO2 per km, in place of the existing 10% band.
The provision of free fuel to company car drivers provides a perverse environmental incentive, the report noted. The UK Government is committed to increasing the fuel benefit charge multiplier—which is used to calculate the tax payable on free fuel—at least in line with inflation each year. The Pre-Budget Report announced that to support the public finances and encourage more fuel-efficient travel, from 6 April 2010, the multiplier will increase from £16,900 to £18,000. The van fuel benefit charge—on which tax on free van fuel is payable—will also increase from £500 to £550.
The Government has also announced that it is to support continued investment in transport infrastructure, including the £400 million M1 improvement scheme. The scheme will increase capacity from Junctions 10-13.
The Pre-Budget Report also announced that £400 million (US$646 million) will be spent over the next two years “to support green growth and the development of low-carbon technologies, building on the £1.4 billion package announced at Budget 2009”. This will be part-funded through a £150 million (US$242 million) increase to the Strategic Investment Fund for low-carbon projects. These funds are to be directed at a number of sectors including boosts for domestic energy efficiency, community-level power generation, offshore wind development and decarbonizing the chemicals industry in addition to transport sector priorities detailed above.
Resources
HM Treasury’s Pre-Budget microsite
They can solve the biofuel duty differential by making it effective only for algae and cellulosic from existent sources - i.e. without new land use impact.
A guy who makes small quantities of ethanol from distillery waste - should get a tax break. Either on the output or on the cost of operations. And what about municipal waste to alcohol systems? Or farmers using cellulosic waste, usually burned or plowed under?
Way too prissy sensitive to defunct fears of GHGs.
Posted by: sulleny | 21 December 2009 at 08:38 AM
I think you are allowed to make your own biodiesel and run your car without a tax penalty - something like about 3000 litres. But then this is only viable when you can get waste vegetable oil for a knockdown price. Otherwise veg oil costs around the same as pump diesel at £1.10 per litre ($6.70 per us gallon).
Otherwise the motorist is at the centre of "The Green Rip Off" where they pay much more than other forms of fossil fuel consumption, mainly through excessive fuel duties and vehicle taxes, yet the government still seems to be hell bent on raising these taxes above inflation. It knows it can do this because:
People who do not have the luxury of a convenient walk, cycle route or public transport link have to use a car;
This is componded by government planning policy that over the last few decades has permitted modernist suburban development and decentralised employment, shopping and leisure which has made car travel more necessary. Only now is there a focus oin urban renaissance policies and here such policies are not responding effectively to housing market demands;
People cannot afford to downsize in many cases - so its cheaper to run an older but thirstier car;
People offset the costs by cuttting back on spending elsewhere;
People get used to paying high fuel prices - take it as a given;
The policy of tax rises is regressive, hits the poorest hardest and hardly affects higher income groups who are more likely to be owners and users of larger cars such as SUVs in the UK.
Fuel tax does send environmental signals, that is true. But when it is used to an extreme, as it is in the UK, then it gets beyond the joke. A government think tank also suggests that the price should rise to £2.00 per litre ($12.16 per US gallon) as if the price wasn't eye watering enough.
The UK almost ran dry in 2000 through fuel protests, the government responsed with gesture politics and is at it again. It wont' surprise me if refineries are blocked again if this carries on. If this happens the hauliers will have my backing, not the government.
http://www.taxpayersalliance.com/egro.pdf
Posted by: Scott | 22 December 2009 at 01:00 AM
Governments (of most democratic nations) have more and more difficulties to pass and sell regulations and laws essential to the well being of the nation.
The NOT in may backward; NOT in my time; Not with my money; NOT in our country, NOT in my State etc... is so deeply ingrained into our acquired rights and way of life that we are progressively becoming impossible to govern.
Even referendums (the ultimate democratic mechanism) with 57+% are being challenged.
It seems that our notion of freedom and democracy has gone astray. New sets of DO and DONT may be required.
Citizens must have RIGHTS and RESPONSIBILITIES. We shout out and overuse the former but forget the latter much too often.
We all want high quality roads, education, health care, clean air, clean electricity etc but we dont want to pay for it or even see it.
Where did we get this unbelievable and unrealistic conception of a workable democracy?
The time may be near to have a new Balanced, Fair and Adult Democracy.
Posted by: HarveyD | 31 December 2009 at 07:54 AM