RAC Foundation News: The 2020 Budget - What It Means for Motorists

If there wasn’t enough news around this week – what with the coronavirus and the global stock market meltdown – the Budget and its immediate aftermath have provided a multitude of announcements that will impact on motorists.

Alongside the decisions to keep fuel duty frozen – it has now been levied at 57.95p per litre on both petrol and diesel since March 2011 – and invest an extra £2.5 billion to fill in potholes on local roads, there was also confirmation of the second Road Investment Strategy (RIS2), effectively the five-year plan for maintaining and enhancing England’s strategic routes; that is, the motorways and major A roads.

The Chancellor said £27 billion would be committed to upgrading the strategic network between now and 2025 with schemes to include a new Lower Thames Crossing to alleviate congestion at Dartford where the M25 currently crosses the river, and the building – after three decades of dithering and 50 different proposals – a two-mile tunnel to take the A303 under Stonehenge.

A large part of the RIS2 investment is focused on smart motorway projects where the existing hard shoulder is turned into a running lane. The concept had been under scrutiny following concerns over the safety of such schemes.

But this week the Department for Transport published its review of so-called all lane running motorways and deemed that while “some risks on these roads are greater, others are less,” so that overall they are as safe, or safer, than conventional motorways.

However, to make them safer still there will be additional measures introduced on both existing schemes and those on the drawing board to include:
• Speeding up the rollout of stopped vehicle detection to spot broken down cars in live lanes
• Reducing the distance between emergency refuge areas to ¾ of a mile
• Increasing the number of patrols by Highways England traffic officers

There was also an update on green car subsidies. The good news was that the Chancellor committed to keeping the plug-in car grant in place until at least 2022-23, but the bad news is that the amount available per vehicle has been cut from £3,500 to £3,000.

As the RAC Foundation commented:
“As an exercise in pump priming the grant could never be open-ended or extravagantly generous, but the risk is that it gets cut quicker than the retail price of electric cars falls and so fails to tip the balance for the undecided buyer. This is still a fragile market and ultimately the advertised benefits of cheaper fuel and other running costs mean nothing to drivers if the up-front cost of the vehicle is too high in the first place, compared to the petrol or diesel equivalent.”

One of the most interesting, and potentially controversial, papers published this week concerned Vehicle Excise Duty. Ministers have issued a call for evidence on potential changes to the system to encourage the wider take up of low carbon vehicles. The Government is alarmed that average new car CO2 emissions have been creeping up over the past couple of years after decades of decline.

To halt this rise they are looking at whether the so-called first year showroom tax could be linked to the exact amount of carbon a car produces per mile, rather than under the current system where cars are put into broad emissions bands leading to a situation where cars with emissions that differ by as much as 17% could be given the same VED rating hence financially disincentivising the purchase of the greenest model.

Ministers are also asking whether the first-year rate, or a proportion of it, be levied in subsequent years rather than most cars falling back onto a single standard rate of VED, as most relatively-new cars do now.

Possibly the most contentious idea is that some of the changes could apply retrospectively meaning that VED rates could go up by tens if not hundreds of pounds annually not just for those people who buy a new car in the future but also for those with recent acquisitions. As we said:

“Emergencies demand brave measures and making retrospective changes to taxes would indeed be brave because they’d mean the government is tearing up the deal car buyers thought would apply to them when deciding what to buy. It’s not just the tax hit to car owners that’s at stake, a fall in trade-in values could leave some drivers stuck with a vehicle no one wants to buy.”

Many people buy cars for the medium to long term and for those without a property a vehicle is the biggest investment they are ever likely to make. Ministers won’t be easily forgiven for making that investment decision ever-harder by introducing policies that seem to shift with the wind.

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