News analysis
Driving Towards Zero Emissions
Thomas McLennan, director of policy and public affairs, looks at the impact of budget changes.
he recent UK Budget was always set to be a difficult one. Its implications are widespread, particularly for businesses. Among the announcements that will touch a wide range of sectors and working practices, it also saw the government give a clear indication of how and where it sees road transport decarbonisation being achieved. October’s Budget introduced several substantial changes. Perhaps the most notable is one that extends far beyond our sector and impacts virtually the entire market. The increase in employer National Insurance Contributions (NICs) alone is expected to have a big impact on businesses, adding financial pressure to firms across the country.
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The backdrop of that increase dampened any optimism created by a handful of positive announcements that were scattered throughout the Chancellor’s address.
It had long been trailed that the Budget was likely to see the
Above: Thomas McLennan, director of policy and public aff airs, BVRLA.
government’s purse strings tighten. For many in the leasing and rental sectors, the resulting lack of proactive measures to drive growth was a missed opportunity.
One such measure could have been the expansion of ‘full expensing’ to leasing and rental services. Full expensing allows companies to deduct investment costs from taxable income, promoting growth and reinvestment. Though the Chancellor hinted at possible future support for full expensing, stating to act “when fiscal conditions allow”, this delay leaves companies without the immediate support that would spur economic growth. For road transport, there were significant moves aligning fiscal policies with the government’s Zero Emission Vehicle (ZEV) Mandate. Collectively, they send a clear signal that the government is backing the Mandate and taking steps to incentivise the shift to zero-emission models, while simultaneously introducing measures that make owning a petrol or diesel model less cost effective. After a period of targeted incentives to kickstart the green transition, the stick and carrot are now being used in tandem to see it accelerate.
“For many in the leasing and rental
sectors, the resulting lack of proactive measures to drive growth was a missed opportunity.”
appeal as a step towards zero- emission motoring. Through these adjustments, the government’s message is apparent: businesses and individuals should transition to zero-emission vehicles as swiftly as possible.
For those opting for company cars or participating in salary sacrifice schemes, the extended foresight on BiK rates – now projected through to 2030 – will likely have been welcomed. This certainty demonstrates the government’s recognition of the critical role these programs play in facilitating a fair and effective shift to ZEVs, a message that the BVRLA has been communicating to decision makers for a sustained period.
While some sectors benefit from clear and targeted incentives, others face significant hurdles. For many businesses and individuals, especially those unable to adopt ZEVs due to logistical challenges, operational demands, or cost pressures, the Budget presented more obstacles than solutions. Rental operators, for instance,
who often lack the necessary infrastructure to accommodate a fully electric fleet, will feel the weight of these increased tax burdens without reaping any of the potential benefits. As they bear the brunt of higher fees and duties, the road to zero- emission vehicles remains challenging for them and could hinder their ability to transition at the government’s pace.
Long-standing tax treatments were adjusted, affecting Employee Car Ownership Schemes (ECOS) and double-cab pickups, while non- zero emission vehicles faced a sharp increase in first-year Vehicle Excise Duty (VED). Even Plug-in Hybrid Electric Vehicles (PHEVs) will see substantial Benefit-in-Kind (BiK) tax increases after 2028, drastically reducing their
To address these issues, there is an urgent need for targeted support in the upcoming longer-term spending settlements. Additional assistance could include used EV grants and greater financial incentives for fleets investing in EV infrastructure. Such measures would create an enabling environment, providing vital support to firms and private buyers wanting to make the switch but struggling to make it work financially. independently.
While the Budget reinforces the UK’s commitment to a zero-emission future, it also underscores the need for balanced support. For the transition to be effective and inclusive, especially for used buyers, smaller businesses and the rental sector, the government must strike the right balance of incentives and support.
www.businesscar.co.uk | November/December 2024 | 11
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