Budget confirms fuel duty freeze, alternative fuels duty differential and more funding to build battery benefits

The 2018 Budget has confirmed that the Government will maintain the difference between alternative and main road fuel duty rates until 2032 to support the decarbonisation of the UK transport sector, subject to review in 2024. The Chancellor also confirmed that fuel duty will be frozen for a ninth consecutive year and also that there will be £78m more support for the Stephenson Challenge, to encourage innovation in electric motor technology.

 

The Chancellor announced that there will be a review of the impact of the Worldwide Harmonised Light Vehicles Test Procedure (which gives a much closer representation of on-road fuel consumption and CO2 emissions) on Vehicle Excise Duty (VED) and company car tax (CCT) and that there will be a report next spring. 

 

The Government has also recently consulted on VED reform for vans, published in May 2018. The response will set out proposals to introduce environmental incentives from April 2021. Bands and rates will be set out ahead of the 2018-19 Finance Bill.

 

To support the Industrial Strategy Future of Mobility Grand Challenge, £90 million from the National Productivity Investment Fund (NPIF) will be allocated to the Transforming Cities Fund to create Future Mobility Zones. This will trial new transport modes, services, and digital payments and ticketing. 

 

As part of its investment in R&D, the Government also announced that it  will increase the Industrial Strategy Challenge Fund by £1.1 billion, supporting technologies of the future. This includes up to £78 million for the Stephenson Challenge, supporting innovation in electric motor technology to make vehicles lighter and more efficient..

 

The Budget document explained that as a result of the fuel duty freeze, revenues will be £1,000 lower per motorist by April 2020 compared with what they would have paid under the pre-2010 fuel duty escalator.

 

The Budget has also confirmed an earlier announcement that £20 million additional funding will be allocated to support more local authorities to meet their air quality obligations. 

 

Commenting on the Budget, LowCVP's Managing Director Andy Eastlake said: "Greater certainty around the longevity of the duty differential for alternative fuels is welcome and will encourage more investment in that area. We'd like to see renewable fuels take a larger part of the future alternative fuels mix.

 

"We will work closely with our members and with government in the coming months on the review of the impact of the WLTP introduction on VED and CCT and on the most effective way of communicating the changes to motorists.

 

"With funding to improve air quality and reduce carbon emissions on a generally rising trajectory, we're looking forward to working closely with members and stakeholders to maximise the benefits and opportunities from this support.

 

This - and much more - will be needed, of course, if we're to deliver the 'unprecendented changes' that the IPCC recently reported will be required to meet the 'safe' 1.5C climate target."