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A CUT of 5p per litre in fuel duty is the headline number for the motor industry in Chancellor Rishi Sunak’s Spring Statement.
He also announced that the income threshold for when people start paying National Insurance will rise to £12,570 in July, which Sunak said was a tax cut for employees worth over £330 a year. There was also a pledge to cut the basic rate of income tax from 20p to 19p in the pound before the end of this Parliament
Sue Robinson, NFDA Chief Executive, said: “In today’s Spring Statement, the Chancellor has taken a number of positive steps, however, the measures announced fall short of supporting businesses as they recover from the pandemic and face current challenges such as soaring costs”.
On 1 April, the Business Rates Relief will drop from 66% to 50%; additionally, the maximum each business can claim will fall from £2m to just £110,000. For franchised dealers with more than a handful of sites, this means most of them will pay full rates. Positively, the business rates multiplier will be frozen for 2022/2023.
Robinson said: “Whilst it is positive that the Government recognised the need to extend the Business Rates Holiday, it is extremely disappointing that the claim rate has been reduced as this will exclude most dealer groups”.
As previously planned, national insurance for employers and employees will increase by a combined 2.5% from April 2022. However, the Chancellor has announced the Government will increase the level at which employees start paying national insurance by £3,000 to £12,570.
Robinson, added: “As the cost of living increases for households across the UK, it is welcome news that the national insurance threshold will be raised. However, confirming the previously planned increase in National Insurance is unhelpful and will add further strain to people’s disposable income.
“Increasing the tax burden on businesses sends the wrong message at the wrong time. The rise in National Insurance is a massive blow to small and medium sized franchised dealer groups as they deal with a number of significant challenges including loss of earnings due to vehicle stock and supply issues, as well as staff shortages due to Brexit and Covid-19”.
“The fuel duty cut is welcome news as it will contribute to offsetting the steeply rising costs facing households across the UK”.
Apprenticeship levy review
The Chancellor said the Government will consider whether the apprenticeship levy is doing enough to “incentivise businesses to invest in the right kinds of training”.
Robinson said: “The automotive industry is fully committed to investing in apprenticeships and it is encouraging that the Government will review the current apprenticeship levy in line with NFDA’s recommendations. In particular, in our submission and at previous meetings we have called on the Government to extend the Apprenticeship Levy clawback period by 18 months to support the recovery of automotive apprentices’ recruitment”.
The Government is launching the second round of the Levelling Up Fund. This Fund provides £4.8 billion for local infrastructure projects, with £1.7 billion already allocated to 105 successful projects from the first round.
Robinson said: “Positively, the Government has previously allocated a part the first round of Levelling Up Fund to upgrading EV charging networks in Northern Ireland. With the second round of the Fund, we encourage the Government go further and adopt a similar approach with the rest of the UK”.
Additional measures announced today include a 1% cut to the basic rate of income tax in 2024 (from 20% to 19%) and an increase in Employment Allowance to £5,000.
Philip Nothard, Insight and Strategy Director at Cox Automotive, said he would have welcomed bigger cuts as the automotive industry has faced extremely challenging conditions during the past 12 months with the well-documented supply issues affecting new car production.”
He added: “If the UK Government had made a more significant cut in fuel duty and followed the example of the Irish government, which confirmed last week that excise duty on fuel in Ireland would be reduced by 20 cents per litre on petrol and 15 cents per litre on diesel, the cost of a 60-litre tank of petrol would have been cut by £10 and diesel by £7.50.”
Ashley Barnett, Head of Fleet Consultancy at Lex Autolease, added: “An electric future simply can’t happen overnight. While rising fuel prices might trigger a switch to an electric vehicle, the affordability of EVs still remains a key barrier towards mass adoption, with an ICE vehicle the only option for many drivers. Therefore, as fuel prices continue to soar at an alarming rate, it’s welcoming to see the government take steps to reduce taxes on fuel and alleviate the pressures that businesses and motorists are continuing to face at the petrol pump.”
While rising fuel prices might trigger a switch to an electric vehicle, the affordability of EVs still remains a key barrier towards mass adoption, with an ICE vehicle the only option for many drivers. Therefore, as fuel prices continue to soar at an alarming rate, it’s welcoming to see the government take steps to reduce taxes on fuel and alleviate the pressures that businesses and motorists are continuing to face at the petrol pump.”