Budget special

21st March 2007

In what is likely to be his last speech as Chancellor of the Exchequer, Gordon Brown begins delivering his 11th annual budget to MPs in the House of Commons. Whilst his budget encompasses the government’s total spending plans for the year, our focus will be announcements which affect UK motorists. In the run up to today’s speech, we have heard that the Chancellor is likely to announce a number of incentives for people who make more effort to go green, as well as a big tax rises for people who drive gas guzzling 4x4s. Now’s the time to find out…

Brown spent the first half hour establishing the wider-scale economic issues facing the UK including employment figures, investment forecasts and growth rates. The first motoring news involved a pledge to invest heavily in research and development in the UK, and in environmentally efficient transport technology in particular. He earmarked an extra £100million for this cause.

The main motoring news focussed, as predicted, on cutting the carbon emissions. From a present national average of 167g/km of CO2, Brown is looking to cut the emissions of the average car in the UK to 100g/km in the mid-term. To establish this, he announced that the low fuel duty rate of 20p per litre on biofuels would be extended until 2010. He also announced adjustments to the vehicle excise duty bands. In order to further encourage the use of smaller, more fuel-efficient vehicles, the current tax-free band A rate for zero-carbon emissions vehicles will continue, with band B rates to be reduced by 30 per cent. As expected, the top rate of vehicle tax was raised to £300 for this year, with an extra £100 added in 2008.

Fuel duty will also rise, with a 2p per litre increase announced from October this year, and a further 2 pence added in 2008. Duty is also set to rise by 1.8p per litre in 2009.

4x4s and Road Tax
• At the top of the scale, band G vehicle excise duty payers get hit hardest with a rise to £300 now. A further increase to £400 follows in 2008
• Tax for band B-rated vehicles, diesels and petrol-engined models, will drop 30% from £50 to £35. Alternative fuel car tax will be £15 per annum.
• Mid-term goal announced to reduce average new car’s CO2 emissions from 167g/km to 100g/km
• This will be done by maintaining tax break for vehicles which emit less than 100g/km of CO2. Bands C-D remain unchanged. Band F will incur an extra £10 charge.

Fuel Prices
• Fuel duty will rise by 2p per litre this year
• Price increase has been delayed, and won’t take effect until October
• Fuel duty will rise by 2p again in 2008, and a further increase of 1.8p per litre can also be expected in 2009
• However, the 20p per litre tax on biofuels remains frozen until at least 2010

New Technology
• A big investment in research and development was promised across UK with an extra £100million across all projects promised by 2009
• The money will contribute to developing world-leading environmentally-efficient transport

There was no mention of potential road pricing or congestion charging schemes.