Spring Statement – Chancellor announces VED review for cleaner vans

In an inaugural Spring Statement, the Chancellor of the Exchequer announced a review of Vehicle Excise Duty rates designed to encourage uptake of the greenest light commercial vehicles, as well as bringing forward the business rates review in a boost for businesses.

In a brief Statement which laid out the GDP growth and reducing debt levels predicted by the latest Office for Budget Responsibility (OBR) reports, Philip Hammond said that he aimed to “champion business” with the measures.

In his speech, the Chancellor gave details of the health of the UK’s economy, but without details of major tax changes. These should come at the next Budget Statement later in November.

The UK economy, he said, was growing at a slightly faster rate than predicted in November and borrowing was down. The economy had grown every year since 2010, and the OBR had confirmed growth of 1.7% was achieved in 2017, higher than its 1.5% forecast in last autumn’s Budget.

Growth is expected to be 1.5% this year, 0.1% higher than forecast with 2019 and 2020 unchanged at 1.3%.

Borrowing, said the Chancellor, was due to fall in every year of the forecast and he told the House of Commons debt will fall as a share of GDP from 2018-19. There was “light at the end of the tunnel” for the UK economy, he said.

The Statement contained little detail on vehicle taxation – and certainly none of the clarity in Benefit-in-Kind tax treatment that many wanted to see.

However, the Chancellor did say that a review of VED road tax would look to bring in a reduction in costs for the greenest commercial vehicles.

And he signposted the opening of the next round of bidding to cities across the country for the remaining £840m from the £1.7bn Transforming Cities Fund which was announced at Autumn Budget 2017 when around half of it was given to combined authorities with mayors.

He also said that eight years of consecutive freezes in fuel duty were worth around £850 to the average motorist, as well as mentioning the progress of the biggest road building programme since the 1970s and huge investment in infrastructure projects such as Crossrail.

Addressing a packed House, he said that a review of business rates would now take place in 2021 in a move that would also usher-in “triennial reviews from then on”. He said this came on top of a review of business rates, which he claimed would reduce rates for small business by over £10 billion.

Many fleet pundits would have liked to see the Spring Statement give businesses more clarity on the future direction of vehicle taxation.

Last November’s Budget Statement revealed major tax changes, including a rise in the existing company car Benefit-in-Kind tax supplement from 3% to 4%, as well as a Vehicle Excise Duty (VED) supplement for new diesel cars first registered from April 1, 2018. The First Year Rate will now be calculated as if cars were in the VED band above.

The moves have piled extra pressure on diesel cars, already under scrutiny following adverse pollution and health warnings to the extent that diesel registrations have collapsed by around 25% year-on-year.

And many fleet pundits, including fleet managers’ association ACFO, had called on the Chancellor to clarify company car tax rates for the coming years, saying that it was unfair that drivers were having to enter into three or four year agreements without knowing how they will be taxed in future.

And in a letter to the Chancellor ahead of the Spring Statement, the BVRLA urged him to accelerate the introduction of the 2% company car tax band for zero-emission vehicles.

This tax band is currently scheduled to increase over the next two years to a high of 16% in 2019/20, before dropping to 2% the year after.

There were signs that the current tax rate was putting the brakes on new EV registrations from company car drivers, who were postponing the move to electric vehicles until the tax regime offered an incentive, said the BVRLA.