Fiscal Statement is “Mixed Bag” for Fleets

Date: 18th November 2022

Today’s fiscal statement has been a “mixed bag” for fleets with some welcome gains and some obvious losses – plus a return to economic austerity – says the Association of Fleet Professionals (AFP)

Paul Hollick, chair at the industry body, said that the biggest win came from the news that increases on company car taxation for electric vehicles would only rise by 1% a year to a maximum of 5% from 2025-26 through to 2027-28.

He said: “We’ve been campaigning, along with the BVRLA and other industry bodies, to ask government to both limit any rise in benefit in kind for EVs and to provide longer term certainty that would allow fleets to plan for the future. Here, we feel as though we have been listened to, and that well-judged measures have been put in place that will enable fleets to continue to plan for electrification through to near the end of the decade.”

Paul also welcome news that the 100% first year allowance for EV charge points for both corporation and income tax purposes would be extended to 2025 – but said that the good news for fleets largely ended there.

“Elsewhere in the chancellor’s statement, we saw a real mixed bag. Probably the biggest disappointment comes from the decision to, in most cases, equalise vehicle excise duty with petrol and diesel cars and vans from 2025. This is still some time away and probably the strategic thinking is that there will be market equity between EV and ICE by that point but if we have learnt anything from the last few years, it is that predicting the shape of the new vehicle market is very difficult and this could yet prove to be a move that ultimately slows EV adoption by both new and used buyers.

“Of course, bearing in mind the £40,000 expensive car supplement in VED, this could be part of a government strategy to try to make EVs more accessible, with manufacturers being effectively encouraged to keep prices below this level, especially in the light of recent price escalation following the pandemic.”

Paul added that the larger picture from the fiscal statement was that the government’s approach could credibly be compared to the austerity policies adopted following the 2008 global economic crisis, and that fleets would come under similar pressures to then.

“While the proportions look a little different from the last time, we are going to see a combination of very large tax increases and very large decreases in public spending, bearing a strong resemblance to the previous experience.

“Almost inevitably, this will mean that organisations will be preparing for tougher times by trying to identify ways to reduce costs right now, and their fleet operations will come under the microscope. We expect cost control and reduction – always a preoccupation for our members – to move even higher up the agenda.

“Certainly, we are hearing more discussion about this area from within the AFP and we expect discussion about both innovative and established methods of making savings to become an increasingly large part of our activity. For example, there are reports that fuel duty will automatically increase by 23%, or around 12 pence a litre, in April and this is just one of many similar issues that will focus the attention of fleet decision makers.

“Additionally, we have made our own gesture to support our members through this economic crisis by freezing our membership and training fees through the end of 2023. We believe that this is the right thing to do at this moment in time.”