Chancellor Philip Hammond

Budget 2018: key points for motorists and how the industry reacted

Chancellor Philip Hammond

Chancellor Philip Hammond has announced what’s described as the biggest ever cash injection for England’s major roads in the 2018 Budget.

The flagship £28.8 billion National Roads Fund upgrade plan will run from 2020-2025, and forms the major part of a £25.3 billion budget for Highways England, called Roads Investment Strategy 2.

This is a 40 percent increase on the previous five-year plan’s £17.6 billion (dubbed Roads Investment Strategy 1) – and it will be raised largely from ring-fencing Vehicle Excise Duty (VED). This was announced in the 2015 Budget by then chancellor George Osborne, following claims only 25p in every £1 raised from VED was being spent on roads.

The government also announced £3.5 billion of ‘new money’. This will be used by local councils to upgrade major local roads that fall outside the control of Highways England.

Another £150 million will be provided to improve problematic road junctions and congestion hotspots, benefitting all road users, not just motorists.

The UK’s pothole scourge was addressed in the 2018 Budget with an extra £420 million for road repairs. This is on top of a previous £300 million pothole fund (although the Asphalt Industry Alliance says to fix all England’s potholes would actually cost £8 billion).

The Chancellor said the £420 million sum “will be available immediately, to local highway authorities, for fixing potholes, bridge repairs and other minor repairs”. 

There’s also a £680 million commitment to supporting sustainable transport in cities – that’s buses, trams and cycling routes. From 2022, Future Mobility Zones will be created with £90 million from the Transforming Cities Fund. The Treasury says this will help “trial new transport modes, services, and digital payments and ticketing”. The West Midlands region alone will receive £20 million of it.

As earlier announced by Prime Minister Theresa May, fuel duty has been frozen for the ninth successive year. “This will keep the cost of fuel down for millions of drivers across the UK,” said the Chancellor, “saving people around £800 million this year alone.”

The saving to the average car driver will be more than £1,000, and for the average van driver, £2,500.

The tougher new WLTP fuel economy test has raised the CO2 emissions of many big-selling cars, with particular impact on company car tax. The government says it will review the impact of WLTP, both on VED and company car tax, in the spring.

Ahead of this, VED and company car fuel benefit charges will increase in line with RPI. 

The 2018 Budget also hinted that greater changes to motoring taxation are being considered. “Technology is changing many aspects of the economy – including the vehicles we drive – and the government is considering how the tax system will need to adapt to manage those changes.” Could this be an early indication of road pricing, perhaps?

2018 Budget for motorists: reaction  

SMMT

“There are some welcome announcements in the Budget,” said Society of Motor Manufacturers and Traders chief executive Mike Hawes, but “the automotive industry was looking for a stimulus to boost a flagging market. We wanted to see more incentives for consumers to purchase the latest, most environmentally friendly vehicles.

“The forthcoming review into the impact of WLTP on Vehicle Excise Duty and company car tax must, therefore, ensure that motorists buying the latest, cleanest cars are not unfairly penalised. Industry looks forward to working closely with government on this review to ensure we encourage the newest, cleanest vehicles on to our roads rather than incentivising consumers and businesses to keep older vehicles going longer.”

RAC

“This is good news for the nation’s motorists,” said RAC chief engineer David Bizley. “While the focus of this cash injection is on strategic major roads, it is also positive that other local roads will benefit to some extent. But what is also needed going forward is a similar long-term strategy and funding for the maintenance and improvement of all local roads so that we can, over 10 years, eliminate the backlog.”

BVRLA

“The BVRLA was dismayed to hear that the Budget included no reference to an early introduction for the 2 percent company car tax rate for electric vehicles,” said chief executive Gerry Keaney. “The Chancellor chose to ignore the overwhelming voice of fleets, motoring groups, business organisations, environmental groups and MPs – all of whom were united in calling for this simple tax measure to support the electric vehicle market.

“The Government has missed a golden opportunity to incentivise the most important market for electric cars and is in danger of undermining its own Road to Zero strategy. “

Cox Automotive

Philip Nothard, customer insight and strategy director at automotive solutions provider Cox Automotive UK, said: “This was a very broad budget. We now need to have a real look into the detail and what it actually means for car owners.

“The freeze in fuel duty is obviously welcomed but there didn’t appear anything new, with no obvious references to challenges that the industry currently faces such as WLTP, autonomous vehicles and #dieselgate”.

Paul Johnson, IFS director

Labour MP Emily Thornberry

2018 Budget: cash for motorists

  • £28.8 billion: Roads Investment Fund (2020/25)
  • £420 million: local road maintenance (2018/19)
  • £150 million: tackling local congestion hotspots (£75 million in 2021/22 and the same in 2022/23)
  • £680 million: Transforming Cities fund (2022/23)
  • £90 million: Future Mobility Zones (2019/20 and 2021/22)