The Budget 2018: what does it mean for drivers?

In his final Budget before the UK’s planned departure from the EU, Chancellor Philip Hammond declared that the era of “austerity is coming to end.”

For motorists, the headline was a £30 billion boost for the nations’ roads, which the Chancellor called the “biggest-ever single cash investment” in the UK’s transport network.

But how else does the Budget affect motorists? Here, we take a look at the announcement in more detail.

The Budget 2018 for motorists:

• Fuel Duty frozen
• Insurance Premium Tax (IPT)
• Investment into roads
• Extra funds for potholes
• Benefit in kind on electric vehicles
• Vehicle Excise Duty (VED)
• Electric Vehicle charging
• UK Digital Services Tax (DST)

Fuel Duty frozen

As expected, the Chancellor announced that fuel duty would remain frozen for the ninth successive year, bringing the total saving to the average car driver to over £1,000.

Earlier this year, the RAC wrote to the Treasury and submitted evidence in support of keeping the freeze on Fuel Duty intact. The RAC welcomes the Chancellor’s announcement, which will provide an ongoing boost for motorists.

Insurance Premium Tax (IPT)

The RAC has supported the Association of British Insurer’s campaign not to raise IPT further, and the 2018 Budget documents appear to confirm that no further rises in IPT rates are expected. 

RAC head of external affairs Pete Williams supported the Chancellor’s decision not to increase IPT after three rises in the last three years, but called the failure to recognise the role of telematics-based insurance a missed opportunity.

He said: “We would have liked to have seen recognition from the Chancellor about the role that telematics-based insurance policies can play in terms of safer driving, particularly among younger drivers.

“A cut in the rate of IPT for such policies would have encouraged the take-up and affordability of telematics policies and the proven benefits these offer of safer driving behaviours among young and new drivers – a missed opportunity from the Treasury.” 

READ MORE: Young drivers’ car insurance is ‘10% of yearly salary’

Investment into roads

A headline announcement sees £28.8 billion allocated for upgrades to major roads (motorways, A roads, and designated local roads of strategic importance) to take place in the five years from 2020/21. 

This investment will be largely funded by vehicle excise duty — the first time that the tax has been “ring-fenced” for use on the roads since former Chancellor George Osbourne pledged to do so in 2015.

In addition, the government announced £150 million worth of funding available to local authorities to improve capacity at roundabouts. This will help tackle increased congestion and improve some of the busiest sections of the road network. 

Mr. Williams called the Chancellor’s decision to honour the commitment made by his predecessor to ring-fence money collected from vehicle tax a “big step in the right direction.”

He added: “While the focus of this cash injection is strategic and major roads, it is also positive that other local roads will benefit to some extent – any additional funding to help fix our local road network is welcome. 

“The condition and maintenance of local roads is motorists’ top concern according to research from the RAC Report on Motoring.”

Extra funds for potholes

The Chancellor announced that £420 million will be provided for fixing potholes, repairing damaged roads and keeping bridges open and safe. A further £150 million will help improve local junctions, allowing better access to workplaces, town centres and community facilities. 

These funds are in addition to the annual £1 billion highways maintenance budget and the recently-announced £300 million potholes fund.

Mr Williams called the £420 million funding a drop in the ocean compared to the needs of the road network and the problems motorists face. 

He said: “Independent analysis suggests the cost to bring our local roads up to an acceptable standard is around £9.3bn. We have been calling on the Chancellor to take the opportunity to use this Budget to commit at least 2p a litre from existing fuel duty revenues as a dedicated fund for local roads improvement. 

“This, together with existing sources of local roads investment, would have raised the required amount to fix our local roads over the next 10 years.”

READ MORE: The RAC Guide to the Great British Pothole and Other Road Surface Defects

Benefit in kind on electric vehicles

Despite the RAC calling for the government to bring forward by a year a reduced rate for electric vehicles, the budget documents appear to show that there are currently no plans to do so.

Vehicle Excise Duty (VED)

From 1 April 2019, VED rates for cars, vans, and motorcycles will increase in line with the Retail Price Index. 

The government will shortly publish a summary of responses from the consultation on VED reform for vans, published in May 2018. The response will set out proposals to introduce environmental incentives from April 2021. Bands and rates will be set out ahead of the Finance Bill 2019-20.

Electric Vehicle charging

In good news for the development of electric vehicle infrastructure, the Chancellor announced plans to extend the Enhanced Capital Allowances (ECAs) for companies investing in electric vehicle charge points to 31 March 2023. 

READ MORE: Electric car charging — why is it so complicated?

UK Digital Services Tax (DST)

The government announced plans to introduce a new 2% tax from April 2020 on the revenues of certain digital businesses to ensure that the amount of tax paid in the UK is reflective of the value they derive from their users

The tax will apply to revenues generated from the provision of business activities including search engines, social media platforms and online marketplaces. It will also apply to revenues from those activities that are linked to the participation of UK users, subject to a £25 million per annum allowance. 

The tax will only apply to groups that generate global revenues from in-scope business activities in excess of £500 million per annum and will include a safe harbour provision that exempts loss-makers and reduces the effective rate of tax on businesses with very low profit margins.

Copyright Press Association 2018. Motoring News articles do not reflect the RAC's views unless clearly stated