News analysis
From ‘Strong and Stable’ to ‘Strategic and Smart’
Change is coming. The UK will take to the polls at some point this year, potentially as early as May. A General Election generates a power shift and all signs are pointing to the next one having a seismic impact.
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hange is coming. The UK will take to the polls at some point this year, potentially as early as May. A General Election generates a power shift and all signs are pointing to the next one having a seismic impact.
Next month’s Spring Budget is the Chancellor’s last chance to show the current government’s fiscal priorities. A positive reaction on 6th March could give the Prime Minister the confidence to call an election. Widespread criticism would likely extend that timeline towards the end of this year.
Tax cuts are always popular. At a time when voters and companies are struggling with rising costs, steps that put money back in pockets are a quick way to see popularity surge. Cuts don’t just come with a big price tag, though. Less money coming in through taxes means less money to spend on public services and infrastructure. Early indicators are that widespread tax cuts are a pipedream. The Chancellor has been managing expectations this month, suggesting that any cuts would need to be “strategic” and “smart”.
So what does that mean for our sector?
A major statement such as the Spring Budget puts everything on the table. Every department, sector, and industry will be seeking change of some sort. It is rare that everybody is left happy.
Our sector presents a host of strategic and smart solutions though. We have always led the adoption of zero-emission cars, a vital transition for the UK to get anywhere
Below: The UK could go to the polls as early as May and it could have a huge impact on our sector.
Above: Rebalancing the Expensive Car Supplement for ZEVs would help to reinforce the government’s commitment to decarbonisation.
near its decarbonisation targets. With the introduction of the ZEV Mandate in January, it is important that the momentum built by the fleet and company car sectors ramps up. The UK is behind target – 22% of new vehicle registrations this year need to be for zero-emission vehicles. While our sector is already above that target, private demand is holding back progress. Cost has always been a driving force behind EV adoption. That won’t change. That needs to be in the Chancellor’s thinking. Some of the cost savings that ZEVs have benefited from up to now can’t last forever. As more hit our roads in place of new ICE cars, income from fuel duty and vehicle excise duty will take a bigger and bigger hit. The shortfall is estimated to run into the tens of billions. No government can swallow a drop of such magnitude.
Knee-jerk changes are not the answer. Zero-emission vehicles need to pay their way, but as part of a regime that reflects the modern day. The Expensive Car Supplement (ECS) is a great example of how a legacy policy risks treating ICE
12 | February 2024 |
www.businesscar.co.uk
and zero-emission vehicles as the same when that is simply not the case. The ECS applies on top of VED, both are due to be applied to ZEVs from 01 April 2025. £40,000 is the dividing line from which point the ECS is applied.
Considering the current model line-up, private buyer interest, and the overall cost pressures households are facing, that threshold is simply inappropriate for ZEVs.
The ECS was introduced by HM Treasury to capture only the most expensive part of the segment. When looking at the current leasing fleet, around three-quarters of ZEVs are above the ECS threshold and would face the charge from next year. A disproportionate number of the cleanest, greenest vehicles are set to be subject to an additional cost at a time when price parity with ICE is still some way off. In 2023, ZEVs were 36% more expensive than ICE vehicles. That price premium is not moving enough to stimulate interest in the parts of the market yet make the switch. With ZEVs already carrying a higher list price, the ECS will only penalise
Above: Toby Poston, corporate affairs director, BVRLA.
consumers and put ZEVs further out of reach. At the same time, manufacturers are expected to sell greater volumes. Pushing ZEV share up from 16.5% to 22% in just one year is a long shot and the Mandate targets only increase.
Rebalancing the Expensive Car Supplement for ZEVs would align with the Mandate and show the government is committed to achieving its decarbonisation targets. It would be a move that is as strategic as it is smart.
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