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Pre-Budget Report limits rate of VED changes, announces incentives for low carbon buses

Tue 25 November 2008 | Back to news list | More bus news

The Chancellor has announced that CO2-based Vehicle Excise Duty changes will be introduced more gradually than previously planned. The Pre-Budget Report also includes an increase in fuel duty – though it is more than offset by the general VAT reduction – and the promise that reforms to the system of bus subsidies will provide incentives for operators to introduce low carbon buses.

The Pre-Budget Report confirms the introduction of six new VED bands in 2009 and the introduction of a differential first year rate from April 2010 “to provide a stronger signal to consumers at the point of purchase”. However, it also announces that to “reduce pressures on motorists during the current economic downturn, there will be no significant rate changes until 2010".

Mr Darling said that under the new 13-band VED regime, no driver would initially pay more than £5 extra in any band. Drivers would pay no more than £30 extra in VED from 2010, compared with up to £90 under the initial proposal in the March Budget.

The Chancellor also announced that the 2 pence per litre increase in fuel duty planned for 2008 will now take place on 1 December 2008. However, as a result of the 2.5 per cent cut in VAT this December, the cost of petrol and diesel will fall for private motorists who will see no pump price increase as a result of the two measures combined.

To support the struggling car industry, the PBR also stated that the Government is calling on the European Investment Bank to double its financial support for the next generation of ‘greener cars’ by making available 8 billion Euros over the next two years. The PBR says that any support should target significant carbon dioxide reductions through research, development and innovation expenditure as well as improving the energy efficiency of related infrastructure and production. The funds should be made available quickly on a fair, equitable and commercial basis across all EU Member States.

The Pre-Budget Report notes that the Department for Transport DfT has consulted on changes to the Bus Service Operators Grant (BSOG) and that reforms to the grant will introduce incentives for low carbon buses as well as smartcard ticketing and global positioning systems (GPS). The DfT says it is also challenging the industry to improve its fuel efficiency and will announce further measures shortly.

The LowCVP provided a detailed submission to the BSOG consultation which was welcomed by the Department for Transport. (To download the LowCVP submission, follow the associated link.) The Partnership will also be represented on a working group, set up by the DfT, to take forward the changes.

Reported in the Financial Times, a spokesman for the Society of Motor Manufacturers and Traders, described the PBR measures as “a positive first step”. But he added: “We now need to see action to remove the constraints on credit.”

Green groups described the tax changes as a retreat by government. “Green taxes are good things, as they are extremely important if we’re going to become more competitive in our use of energy,” Greenpeace said.

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