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Chancellor announces £220m for Clean Air Fund in Budget 2017 (+ LowCVP response)

Wed 22 November 2017 | Back to news list

The Chancellor has announced the creation of a new £220 million Clean Air Fund, funded by targeted changes to company car tax and vehicle excise duty for those buying new diesel cars[1]. The Fund will support English local authorities in tackling the most challenging local air pollution problems. The Budget has also confirmed the introduction of a new £400m Charging Investment Infrastructure Fund and £100m to guarantee continuation of the Plug-in Car Grant to 2020.

New ‘interim’ diesel cars registered after 1 April 2018 will be subject to a new Vehicle Excise Duty (VED) supplement, so that their First-Year Rate will be calculated as if they were in the VED band above. This measure, however, will not apply to the cleanest next-generation diesels which meet the full emission standards required in 2020 in real driving conditions, known as Real Driving Emissions.

There will be a rise in the existing Company Car Tax diesel supplement from 3% to 4%, with effect from 6 April 2018. This will also apply only to diesel cars which do not meet the Real Driving Emissions standards.

To support the transition to zero emission vehicles, the Budget states that “the Government will regulate to support the wider roll-out of charging infrastructure; invest £200 million, to be matched by private investment into a new £400 million Charging Investment Infrastructure Fund”.

The Chancellor’s Budget speech also announced an additional “£40 million in charging R&D”.

There was a commitment in the Budget to provide £100 million to “guarantee continuation of the Plug-In Car Grant to 2020” to help consumers with the cost of purchasing a new battery electric vehicle.

Commenting on the Budget, the LowCVP’s Managing Director Andy Eastlake said: 

There are a range of measures in this Budget to support the introduction of low emission vehicles, as well as to accelerate the transition to the cleanest diesel cars which will also be needed to lower CO2 emissions.  Evidence of the emissions performance of the latest buses and trucks provides confidence that the industry will rapidly respond to these measures, while the wider ULEV market continues to grow with the ongoing support.

“The new Clean Air Fund will help the introduction of much-needed measures at local level to tackle the urgent problem of air pollution in our cities.

“We welcome is the commitment to fund the expansion of recharging infrastructure for electric vehicles, without which the market could be held back. We look forward also to learning further details about how the additional £40m for charging R&D, mentioned in the Chancellor's speech, will be used.

“The announcement of £100m to support the continuation of the Plug-in Car Grant helps to signal support for this market but, considering the projections of the growth in demand for EVs, careful analysis of how these funds are to be allocated will be needed to ensure that support is still available in 2020.

“Pump prices for petrol and diesel are around 20% lower today in real terms than they were in 2010. Freezing fuel duty for the eighth year in succession looks like a missed opportunity to encourage the introduction of cleaner and renewable fuels and to raise revenues much needed for other purposes.”

In other measures the Budget confirmed:

  • A commitment to electrify 25% of cars in central government department fleets by 2022.
  • There will be no benefit-in-kind charge on the electricity that employers provide to charge employees’ electric vehicles.
  • There will be no rise in fuel duty in 2018-19 which will be frozen for an eighth year since the pre-2010 ‘fuel duty escalator’ was removed.
  • There will be a review of whether the existing fuel duty rates for alternatives to petrol and diesel are appropriate, ahead of decisions at Budget 2018.
  • The fuel duty escalator for Liquefied Petroleum Gas (LPG) will end and the LPG duty rate will be frozen in 2018-19, alongside the main rate of fuel duty.
  • An exemption (from April 2019) of zero-emission capable taxis from the VED supplement that applies to expensive cars. There will be a consultation in advance on how to define such taxis.

On autonomous cars, the Chancellor reiterated the Government’s support and enthusiasm for developments in this sector. It proposes to “make world-leading changes to the regulatory framework, such as setting out how driverless cars can be tested without a human safety operator”. The National Infrastructure Commission (NIC) will also launch a new innovation prize to determine how future roadbuilding should adapt to support self-driving cars.

A new £1.5bn Transforming Cities Fund from the National Productivity Investment Fund (NPIF) to support intra-city transport, which the Government says will target projects which drive productivity by improving connectivity, reducing congestion and utilising new mobility services and technology.

[1] The Government is to launch a consultation alongside the Budget on options that could be supported by the new Clean Air fund.


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