Fuel duty will remain frozen at the present rate for the next 12 months, Chancellor of the Exchequer Jeremy Hunt has announced in today’s Budget speech.
The measure involves the maintaining of the freeze on fuel duty which has been in place since 2011, and also the continuation of the 5p cut which was introduced in March 2022.
The Chancellor also announced that the government would seek to extend full expensing, which allows businesses to write off the full cost of plant and machinery investment including trucks and vans, to assets for leasing, ‘when fiscal conditions allow’, with draft legislation to be published shortly.
Responding to the fuel duty announcement, Logistics UK director of policy Kevin Green said: “The extension to the 5p per litre cut in fuel duty announced by the Chancellor in today’s Budget is good news for the logistics sector, at a time when the industry is facing increasing cost pressures from rising wage and fuel costs.
“Logistics powers every part of the economy, and an increase in operating costs at this time caused by the reversal of the fuel duty cut could have caused disastrous inflationary pressure on the economy.
“Maintaining the fuel duty cut will provide logistics businesses with more certainty as they drive the transition to a greener economy.”
Regarding the full expensing announcement, Alphabet GB consultancy and channels development manager Caroline Sandall-Mansergh said: “Alongside many others in the industry, we recognise this change as crucial to ensure the new scope for full expensing is fit-for-purpose for the fleet of today.
“Many companies are turning to leasing vs. outright ownership of vehicles as a more cost-effective route for investment, and as a result, these businesses will see significant benefit in tax exemption through full expensing.
“We hope the government will provide further clarity on timelines, and that it will continue to work with leaders within the leasing sector to ensure the reformed full expensing policy meets the investment needs of the modern business.”
Giving his Budget reaction, Fleet Operations director of consultancy and strategy David Bushnell said: “The decision to cancel the planned increase in fuel duty, effectively freezing it at its current rate, must be welcomed. The move – in the wake of the biggest monthly rise in fuel prices in five months in February – offers a financial reprieve for the fleet sector amidst considerable economic pressures and the burgeoning challenges of operating fleets in the current economic climate.
“However, whilst there will be no additional fuel cost burden for operators of petrol and diesel vehicle fleets in the short term, it is important to highlight that while this measure aids financial planning, it does little to advance the broader objective of transitioning to more sustainable modes of transport.
“The long overdue promise of making full expensing apply to leased assets will help support investment into low and zero emission commercial vehicles, but the government has missed a crucial opportunity to encourage EV adoption, especially electric vans, by failing to reduce the VAT rate on public charging.
“The cost of running EV fleets, particularly those that rely on public charging stations, remains a significant barrier to adoption. A reduction in VAT on public charging could have served as a strong incentive for fleet operators to accelerate their shift to electrification, aligning with the UK’s ambitious environmental targets.
“The government’s commitment to environmental sustainability and reducing carbon emissions is well-noted, but the actions to support these commitments, especially in the context of fleet transport, require more work.”
BVRLA chief executive Gerry Keaney welcomed the full expensing announcement, but also raised concerns about a lack of new EV incentives.
He said: “Today’s commitment to extend full expensing to the rental and leasing sectors is a monumental step forward to rectify an historic injustice. The BVRLA has been an active voice in achieving this change and welcomes the opportunity to engage further in delivering this long overdue alignment in tax policy.
“At a critical time for the transition to zero-emission vehicles, no news is bad news. Today we heard nothing on charging, VED, BIK, VAT on public charging, grants for electric vans, or a consumer education campaign. The Chancellor is leaving our sector in limbo.
“The government needs to be braver in unlocking the billions of pounds in zero emission investments required across the whole road transport sector, from fleets, small businesses and private motorists.”
A spokesperson for the Zero Emission Van Plan – from a coalition led by the BVRLA and including Logistics UK, Recharge UK, the Association of Fleet Professionals, and The EV Café. said: “The Chancellor is ignoring the fact that the van sector needs urgent support to adopt zero-emission vehicles. Vans account for about a fifth of the miles driven in the UK every year, the vast majority of which are driven by polluting models.
“While there were some positive moves to support van operators today, the van sector remains behind on decarbonisation.
“Cost is a major barrier to adoption. The discrepancy between affordability of EVs vs diesel equivalents is prohibitive. The Zero Emission Van Plan is clear in how that gap can be closed.
“Today, the Chancellor missed a golden opportunity to act. Increased fiscal support via extending the Plug-in Van Grant, or introducing new measures, are essential. We will continue to push for such changes until tangible progress is made.”
