What does the Autumn Budget mean for motorists?
We look at what the Government promised to do before it was elected and the Budget measures it has now taken that will help or harm motorists...
The Labour Party made some bold pledges when it was trying to win votes prior to the 2024 election, and some of those ‘carrots’ were designed to appeal to the nation’s 41 million motorists.
The party's manifesto said it would “maintain and renew our road network to ensure it is safe and convenient for drivers and other road users”. It also pledged to tackle the rising cost of car insurance, to bring the ban on non-electric cars back forward from 2035 to 2030, and to introduce standardised battery information requirements for used electric vehicles (EVs).
Perhaps the most eye-catching pledge of all, though, was to fix one million potholes around England each year. This work would be funded partly by deferring the planned bypass around Arundel on the A27 in West Sussex, freeing up a claimed £320 million.
So, a little over 100 days after Labour came to power, and with the Autumn Budget looming, we consider some of the new measures that could be brought in, and the impact they’re likely to have on drivers.
Potholes
What’s the problem with potholes?
There are an estimated 1.3 million areas of broken Tarmac in England and Wales. That’s around six potholes for every mile of local roads.
These potholes don't only increase the risk of accidents as road users try to avoid them, but can cause vehicle breakdowns. The AA says is attended almost 800,000 incidents between January and the end of September 2024 in which a vehicle had broken down or was damaged after hitting a pothole.
In addition, the costs and delays borne by freight and delivery firms are passed on to consumers. According to a RAC Foundation report, a reduction in road maintenance of £1 results in wider costs to society of around £1.50.
However, according to the Asphalt Industry Alliance, the Government's pledge of an extra £320 million, on top of the existing budget of 8.3bn pledged by the previous administration, isn't going to make much of a difference. It estimates that it would cost £16.3 billion to repair all of our roads, and that the process would take 10 years.
What’s being done about potholes?
During the Budget announcement, Chancellor, Rachel Reeves, announced an additional £500 million worth of funding in road maintenance to enable local authorities to repair an additional one million potholes per year. While this is a welcome increase to the existing budget of 8.3bn pledged by the previous administration, it won't transform our roads. According to research by the Asphalt Industry Alliance, it would cost £16.3 billion to repair all of our roads, and that process would take 10 years.
In September, Transport Secretary Louise Haigh praised an initiative that’s been running in Blackpool called Project Amber. It uses an advanced imaging system to capture high-definition photographs of roads to identify potholes and gather data on areas that urgently require repairs.
The Transport Secretary has said the aim is to implement similar systems around the country because they can significantly reduce costs for councils. The Blackpool pilot scheme cut the council’s annual bill for compensating people for pothole-related claims from £1.5 million annually to just £719 in 2023.
Funding to fix potholes will come partly from the cancellation of some roadbuilding schemes, including £320 million from the deferment of the A27 bypass in West Sussex and the A303 Stonehenge tunnel, and improvement works on the M27 near Southampton, the A47 in Great Yarmouth and the A1 near Morpeth.
Car insurance
What’s the problem with car insurance?
Although car insurance premiums fell by 2% in the first half of 2024, they’re still high. The average annual price of cover is £622, which is 21% higher than it was a year ago, according to data from the Association of British Insurers (ABI).
This is due to soaring claims and car repair costs, according to the ABI, which tracks the cost of 28 million car insurance policies taken out each year and the claims made on them. It says insurers paid out £2.9 billion in motor insurance claims in the second quarter of 2024 – up 18% on £2.5 billion paid in the same period in 2023. Its research shows that repair costs are also 28% higher this year, totalling £1.9 billion.
What’s being done about the cost of car insurance?
Before the Autumn Budget, the Government announced the formation of a car insurance taskforce, which will bring together experts from regulators, motoring groups, insurers and consumer groups to try to find solutions for the high cost of insurance. Its members will include representatives from the ABI, Citizens Advice, Compare the Market and insurance regulators.
Electric cars
Banning the sale of new petrol and diesel vehicles
A ban on new petrol and diesel vehicles was originally announced in 2017 as a way of helping the UK meet its ambition to become carbon neutral by 2050, with an implementation date of 2040.
The previous, Conservative Government brought the date forward to 2035 and then 2030, before pushing it back to 2035 again last September. However, during the election campaign the Labour Party said it would introduce the ban in 2030.
While the ban applies to the sale of all new petrol and diesel cars, the position on hybrids remains unclear. The Budget statement on this subject was vague, stating: "The government has committed to phasing out new cars that rely solely on internal combustion engines by 2030 and from 2035 all new cars and vans sold in the UK will be zero emission."
So it seems there may be a five-year stay of execution for hybrids and plug-in hybrids (PHEVs), acting as a transition period for those who don’t feel ready for a fully electric car.
Reactions to bringing the petrol and diesel car ban forwards again have been mixed. EV champions would like the 2030 deadline to include hybrids, and some car makers agree because they have spent vast sums developing pure electric model ranges, but others feel the 2030 date is unrealistic.
The Society of Motor Manufacturers and Traders (SMMT), which represents car makers in the UK, is calling for financial incentives to persuade consumers to buy electric cars. It says support packages are needed to make the EV switch more attractive and affordable. This is because EVs aren’t selling as well as many in the industry had hoped.
Recent figures show that electrified vehicle production, which includes hybrids, dropped 7.6% in the first half of 2024 and pure electric vehicles only account for around 17% of new car sales so far this year.
The SMMT believes three incentives would help drive up demand for EVs:
- Reduce the VAT charged on new EVs by 50% for the next three years
- Exempt EVs from the expensive car supplement VED rate, which applies to cars costing more than £40,000
- Bring public EV charging costs in line with rates paid for home charging.
On the last point, a FairCharge campaign points out the unfair rate of VAT levied on those who need to use the public EV charging networks. Public EV charging companies have to pay VAT at 20%, while anyone charging a car at home pays only 5% VAT. FairCharge wants the public charging rate reduced to 5%, making charging more affordable for those who can’t charge at home.
Other help with EV charging
It has also been suggested that the Government could provide grants for EV owners without off-street parking to have channels cut into the pavement so they can safely run charging cables to their cars and charge them at home.
Battery health checks for used EVs
The Government has pledged to introduce a standardised battery health certification scheme for used EVs, similar to those already in place in Norway.
The scheme would make it mandatory for used EV sellers to do a health check on a vehicle's battery and provide a certificate to the buyer. Consumers would be encouraged to only buy cars that have health certificates.
The certificate would show the capacity of the battery and how well it is performing compared with other vehicles of its age and mileage.
It would ensure that used EV batteries comply with the new Euro 7 standards, which come into force on 1 July 2025. They state that EV and PHEV batteries in cars must retain an energy storage capacity of 80% at 5yrs/62,000 miles and 72% at 8yrs/99,000 miles.
None of these incentives were mentioned in the Autumn Budget. However, the Government did announce the provision of £200 million to accelerate the rollout of EV charge points, including support for local authorities to install on-street chargers.
What other measures were taken in the Budget?
Changes to road tax
When it comes to road tax (VED), the proposed changes in VED that are due to take effect from April 2025 will remain in place. This means EVs will lose their exemption from VED from April, and buyers will have to pay the next lowest first-year rate, which is currently £10. However, instead of paying the standard car rate of £190 each year after that, they will pay £10 a year until 2029-2030, which is good news for EV owners.
However, VED costs for hybrid and internal combustion-engined (ICE) cars will rise steeply in many cases. The increases are as follows:
Rates for cars emitting 1-50 g/km of CO2, including hybrid vehicles, will increase from £10 a year to £110 for 2025-26.
Rates for cars emitting 51-75 g/km of CO2, including hybrid vehicles, will increase from £30 to £130 for 2025-26.
All other rates for cars emitting 76g/km of CO2 and above will double from their current level for 2025-26. This means the first-year rate of VED for a Ford Puma mild hybrid with CO2 emissions of 122g/km will be £440, and a Land Rover Defender with 243g/km emissions will cost £5490 in VED for the first year.
Changes to company car tax
The Chancellor also confirmed that the low rate of company car tax, also known as benefit in kind (BIK) tax, will remain low from 2028 onwards to continue to encourage the uptake of electric vehicles. The BIK rates for zero-emission vehicles will rise by 2% in 2028-2029 and 2029-2030, taking it up from 5% to 9%.
However, company car tax rates for hybrid and ICE cars will rise from 2028-29 to incentivise the take-up of electric vehicles.
The rate for cars with emissions of 1 – 50g/km of CO2, including hybrid vehicles, will rise to 18% in 2028-29 and 19% in 2029-30.
The rate for all other vehicles will increase by 1% per year in 2028-29 and 2029-30. The maximum rate will also increase by 1% per year to 38% for 2028-2029 and 39% for 2029-2030. This means for vehicles with emissions of 51g/km CO2 and over, rates will increase to 38% in 2028-29 and 39% in 2029-30.
Increasing fuel duty
It was widely expected that the Chancellor would raise fuel duty, the tax that makes up just over half of the cost of each litre of petrol and diesel. It has been frozen since 2012, and in 2022 then-Chancellor Rishi Sunak cut it by 5p to mitigate against sky-high fuel prices resulting from Russia’s invasion of Ukraine in February 2022.
Although leaving the 5p discount in place and not increasing fuel duty would cost the Treasury around £3 billion a year, the Chancellor decided not to make these changes "to support hard-working families and businesses".
Introducing road pricing
Another problem facing the government in the near future is dwindling revenue from fuel duty and road tax (VED) as more people transition from traditionally-fuelled cars to EVs.
To make up for this, the Government might establish a pay-per-mile road-pricing scheme that will charge drivers for how many miles they cover and at what time they travel. However, nothing on this was announced in the Budget.
One road pricing scheme that’s already been announced is the introduction of a fee to get to the other side of the River Thames using the Blackwall Tunnel. This will be introduced when the new Silvertown Tunnel crossing opens in spring 2025. Drivers using either tunnel will have to pay £4 for each journey made during peak hours.
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