Budget 2017: what motorists need to know

THE chancellor of the exchequer, Philip Hammond, announced his 2017 budget this afternoon. As always, drivers are affected, for good and bad. Here are the key points:

• Continued freeze on fuel duty
• £90m for northern England and £23m for the Midlands to address pinch points on the road network
• £690m “competitively allocated” to local authorities across England to tackle urban congestion
• £270m funding for “disruptive technology”, including electric and driverless cars, robotics and biotech
• No mention of road tax overhaul, which comes into effect on April 1
• No mention of insurance premium tax, but it is expected to rise from 10% to 12% on June 1 as previously announced
• No mention of a diesel scrappage scheme

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Fuel duty frozen

The chancellor confirmed fuel duty wouldn’t rise in 2017, freezing it for the eighth time in a row.

Howard Cox, founder of the FairFuelUK campaign, said: “Great news for 37m drivers: the highest fuel duty in the world is frozen again. We are grateful that for the last seven years the government has been listening to our objective campaigning on behalf of motorists, van drivers and hauliers.”

Insurance premium tax rise

There was no mention of a further increase in insurance premium tax (IPT), but in the 2016 autumn statement it was announced that IPT would increase from 10% to 12% on June 1 this year. The tax is applied to home insurance, pet insurance, caravan insurance and roadside breakdown services as well as car insurance.

Edmund King, the AA president, said: “The AA is pleased that the chancellor has not increased IPT in this budget. However, motorists will need to brace themselves for the previously announced rise to 12% from June 1, completing a 100% increase within two years. This is unprecedented in modern tax history. We are disappointed that there is no reduction in IPT for young drivers, who are being priced out of their cars.”

Road tax overhaul

The chancellor made no alteration to new vehicle tax rules due to come into force on April 1. Drivers will pay the tax in bands linked to CO2 emissions levels from their car in the first year after registration, but from year two, any petrol or diesel vehicle that emits more than 1g of CO2 will be liable for a standard rate of £140. Hybrids and other alternatively fuelled vehicles will be taxed £130.

Critics argue that the new tax system discriminates against fuel-efficient cars, as the cost is the same from year two for a V8-powered Ford Mustang producing 299g/km of CO2, for example, as for a three-cylinder Suzuki Celerio that produces just 84g/km. Only pure-electric cars, which emit nothing at the exhaust pipe, will escape the charge.

Vehicles with a list price of more than £40,000 will attract an additional levy of £310 from year two, for a further five years.

Earlier this year a survey by the AA found that more than half (51%) of drivers were unaware of the planned changes.

Vehicle tax rates for hauliers and the HGV road user levy were frozen for another year.

Road improvements

On the road network, Philip Hammond concentrated on congestion, pledging £90m for the north and £23m for the Midlands to tackle pinch points. In addition, he announced a £690m competition for local authorities across England to tackle urban congestion and get local transport networks moving.

However, the chancellor was accused of merely tinkering with roads when their poor condition was not being addressed. Howard Cox, founder of the FairFuelUK campaign, said: “A Conservative chancellor has missed, yet again, a huge opportunity by not announcing a significant UK-wide roads investment plan that would increase GDP four times more than the billions of taxpayers’ cash irrevocably cast in stone for HS2.”

Autonomous cars

Some £270m of the £23bn of investment in science and innovation announced in the autumn will be allocated to “disruptive technologies” including biotech, robot systems and driverless vehicles. Hammond joked that the last of those was “a technology the party opposite knows something about”.

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Free school transport

The prime minister has pledged more funding for new schools, potentially including controversial grammar schools. The chancellor said that helping children from disadvantaged backgrounds travel to and from them was also important, and so any pupils on free school meals at selective schools will also be able to receive free transport.

Diesel scrappage scheme

Some experts had predicted an announcement related to removing dirty diesel cars from the road, perhaps involving a scrappage scheme. They were wrong. However, Theresa May hasn’t ruled out a scrappage scheme in future, as part of a new clean-air strategy.