Chancellor Jeremy Hunt has revealed his ‘Autumn Statement for Growth’, including tax cuts and measures for ‘innovation industries’, but with an absence of big changes for fleets or much support for EV charging.

Due to be one of Hunt’s last economic announcements before a general election, the statement included a larger-than-expected reduction in National Insurance from January and a now-permanent tax break for businesses on the back of falling inflation. However, the tax burden is still on track to reach a post-war high by 2028, the Office for Budget Responsibility has said.

Key changes for fleets include:

Full expensing tax break to be made permanent

In the Autumn Statement, Hunt confirmed that full expensing would be made permanent but has been slammed for retaining the ongoing exclusion of the vehicle rental and leasing sectors.

Introduced in the Spring Budget 2023, full expensing replaced the previous Super-Deduction tax relief for qualifying equipment and machinery including fleet vans/trucks – but not cars – and was due to run until 31 March 2026.

Now permanent, the tax break provides a 100% first-year allowance that enables companies to write off the full cost of their investments against their corporation tax bill in the first year.

The rental and leasing sectors were excluded from claiming these investment allowances and although the Government had confirmed a formal consultation to explore if the exclusion could be removed in the future, on the back of the creation of an industry working group earlier this year, there’s still no news.

BVRLA chief executive Gerry Keaney said: “The Government is banking on permanent full expensing to unleash a wave of new business investment across the UK, but by excluding rental and leasing it is missing a massive opportunity. Our research shows that opening these powerful tax incentives up to the rental and leasing sectors could unlock an additional £1bn worth of investment into low and zero emission commercial vehicles.

“We will continue to work closely with HM Treasury and HMRC on their technical consultation and push for the unfair vehicle rental and leasing exclusion to be removed.”

Alfonso Martinez, managing director at ALD Automotive | LeasePlan – soon to be rebranded as Ayvens and part of the working group along with Lex Autolease and Europcar – also highlighted that opening up the tax break would benefit leasing customers.

“Reforms are needed urgently, particularly to support the electric vehicle market ahead of the first [ZEV mandate] registration targets – a 22% share of new cars and 10% of new vans – being introduced next year. Almost half of business contract hire (BCH) vehicles delivered by BVRLA members were battery electric during the second quarter of this year and, although prices are falling, they are still higher than their petrol or diesel counterparts.”

David Bushnell, director of consultancy and strategy, Fleet Operations, also commented on a lack of action to expand the benefit to leasing firms and customers, saying: “It is only cash-rich business with access to capital that benefit. Failing to extend the scheme to the leasing and rental sectors continues to prove a missed opportunity to support the wider fleet industry, and its critical role in driving business investment and transport decarbonisation.”

Caroline Sandall-Mansergh, consultancy and channels development manager, Alphabet GB, also commented: “We welcome the permanent implementation of full expensing to encourage continued support for spend on machinery such as vans; this will create a lower cost of entry for enterprises looking to invest. However, the scope of the policy must go further, expanding to cars and leased vehicles that will further promote fleet growth across the UK. We hope that over the coming months the Chancellor will work closely with the industry to develop a policy that broadens fleet support overall.

And The Social Market Foundation also expressed caution over full expensing.

Sam Robinson, SMF senior researcher at the independent think-tank, said: “Out of all the Autumn Statement’s measures, full expensing has by far the biggest potential to stimulate economic growth. But given the big price tag associated with the tax cut, and OBR projections that business investment will decrease as a share of GDP, it is vital that full expensing is rigorously monitored to ensure it is as effective in the real world as it looks on paper.”

Living wage rise, National Insurance cuts and the impact on salary sacrifice

Cuts to personal taxes had been widely expected on the back of a “completely changed” outlook for the economy and the Chancellor didn’t disappoint here.

Main announcements included a rise in the national living wage (NLW) to £11.44 per hour from April 2024 while the main Class 1 Employee National Insurance Contributions (NIC) rate will fall from 12% to 10% from 6 January, saving those on an average salary of £35,000 over £450 a year. Hunt also abolished class two National Insurance payments for the self-employed.

While these will be welcomed by households during the ongoing cost-of-living crisis, ALD Automotive | LeasePlan has warned that the living wage rise and the fall in Class 1 NICs will inadvertently affect salary sacrifice schemes.

Alfonso Martinez said: “Salary sacrifice enables drivers to lease vehicles through their employer and pay for them with their pre-tax income. As long as the vehicle emits 75g/km CO2 or less (which is true of most plug-in hybrid or electric cars), income tax and Class 1 NICs are based on the remaining salary, while the driver pays Benefit-in-Kind for the vehicle and their employer pays Class 1A NICs for providing it.

“With company car tax bands as low as 2% for electric vehicles, this usually helps employers to cut their NIC bill while offering an affordable way for drivers to go electric.

“The Chancellor’s decision not to adjust Class 1A rates means employers won’t see any reduction in their NICs, which could in turn be passed on to employees – who would normally cover those costs. Furthermore, the increased living wage means some employees will no longer be eligible, as the vehicle payments would take them below that threshold.”

He added: “With the latest BVRLA statistics showing 91% of salary sacrifice deliveries are electric, the Chancellor needs to be careful not to undermine the benefits of a system which is enabling drivers to switch to the cleanest vehicles.”

Alphabet GB also warned of the impact on salary sacrifice schemes.

Caroline Sandall-Mansergh outlined: “As the NLW increases, the threshold for salary sacrifice eligibility increases with it, meaning lower-earning employees may not be granted the benefit. With this in mind, it will be important for those who manage fleet to review the schemes they have in place, seeking expertise where needed, to ensure employees’ access to benefits such as company vehicles can remain in place without significant disruption.”

No news on fuel duty

While fuel duty had been expected to figure in the fiscal statement, there was no news here.

This follows the Spring Budget where the Chancellor confirmed that the current freeze on fuel duty and the temporary 5p cut introduced last year would be maintained for the next year, bringing relief to drivers.

It means all eyes will be on the 2024 Spring Budget to see if the temporary cut is continued. While it’s broadly expected that the Government will address it in a pre-election move, the 5p duty cut will be automatically reversed in March 2024 unless action is taken.

Howard Cox, founder of the FairFuelUK campaign, commented: “The threat of the Rishi Sunak’s Budget temporary 5p cut in duty being reversed in the 2024 Budget still hangs over motorists’ heads. That event could have been quashed completely today but the OBR assume the Fuel Duty rise with inflation is part of the anti-driver Treasury’s fiscal forecasts. Increasing duty would be economic and political suicide!”

And Matthew Briggs, CEO at fuel card provider Right Fuel Card, said he was disappointed not to see any further cuts in fuel duty today, particularly for commercial users.

“Although pump prices have seen a small decline, they’re still very much a cause for concern. Given that the current fuel duty cut only remains guaranteed until March 2024, it’s disconcerting to not receive any clarity on the longevity of these discounted rates whilst customers still combat increases in costs across the board, from groceries to energy bills and businesses still face cash flow uncertainties.”

Fleet Operations’ David Bushnell also slammed the lack of clarity.

“Chancellor Jeremy Hunt has begun flicking through the pages of the pre-election playbook to announce measures in his Autumn Statement, designed to help stimulate business growth.

“But for fleet operators his notable failure to cancel the planned increase in fuel duty next April will serve to dampen any early festive cheer. If this goes ahead, the first rise in over a decade would come at a time, in the wake of a cost of business squeeze, when fleets can least afford it.”

But Alfonso Martinez from ALD Automotive | LeasePlan said the company hadn’t been expecting any announcements.

And he differed from the FairFuelUK view, saying that reducing fuel prices narrows the business case for going electric, especially for drivers who rely on public charge points.

Martinez explained: “According to the latest Zap-Map data, drivers would pay an average 79p per kilowatt-hour (kWh) to charge at the fastest ‘rapid’ chargers, which is almost 20p per mile. To put that into context, a diesel car or van would break even at around 37mpg, based on the latest average pump prices.

“With mandatory zero-emission vehicle sales targets arriving next year, and our recent World EV Day research showing running costs are a top priority for drivers, this needs to change.”

Meanwhile, Fleetcor warned that while fuel prices are far from the record highs seen in 2022, they are still fluctuating and various factors could impact price before the year is out. These include the pound-to-dollar exchange rate, possible extra changes to OPEC’s supply and a further fall in demand.

Paul Holland, managing director for UK/ANZ Fleet at Fleetcor, also warned about a continued lack of action on a switch to road user pricing to replace fuel duty and road taxes, despite MPs having said two years ago that there is no viable alternative.

He commented: “At some point the Government will need a robust, alternative way to replace its diminishing fuel duty. Given the growing challenge facing the UK government, individual drivers and large fleets should take a serious look at switching to EVs sooner rather than later, while they can still make savings.”

£2bn+ for zero-emission investment in the automotive sector

As announced last week, the Government pledged over £2bn to support the manufacturing, supply chain and development of zero emission vehicles.

The funding, part of an overall £4.5bn package for strategic manufacturing sectors, was said to have been “warmly welcomed by Nissan and Toyota”.

Speaking last week, Business and Trade Secretary Kemi Badenoch said: “The UK is a global hub for advanced manufacturing, with world-leading automotive, aerospace and maritime sectors. This package builds on recent investment wins, such as the £4bn gigafactory, and the £600m invested to build the next generation of electric Minis, and ensures that the Government can continue to help create jobs, grow the economy, and secure the future of great British manufacturing.”

Mike Hawes, SMMT chief executive, said: “Last Friday’s announcement of £2bn for zero emission advanced automotive manufacturing was an unequivocal vote of confidence in the sector. The Chancellor’s statement, with its focus on business growth, responds to our industry’s need for measures that allow UK automotive to compete for investment.”

He added: “We now look forward to the Government’s advanced manufacturing plan, its battery strategy and how it will support consumers in making the switch to zero emission motoring, as we must not only make these vehicles locally but sell them.”

But David Borland, automotive leader at EY UK, said: “Although it is likely to be gratefully received by the UK’s auto sector, the Government’s support package is unlikely to solve all of the  challenges facing automotive businesses in the UK.

“The sector is navigating regulatory changes linked to the zero emission vehicle (ZEV) mandate and Rules of Origin requirements, as well as ongoing economic headwinds. Indeed, the USA’s Inflation Reduction Act is a much larger support package by comparison, highlighting the magnitude of the UK’s continuing challenge to be a world automotive leader on a consistent basis. While the announcement is a much-needed step towards that, it needs to be part of a broader industrial strategy if the nation’s auto sector is to continue competing among the key players on the global stage.”

Grid reforms to cut connection waiting times but no further EV funding

The Government announced that it’s removing barriers to investment in critical infrastructure by reforming the planning system to speed up approvals and setting out a plan to reduce the time it takes for new projects to connect to the grid.

The Chancellor also said the Government would look to remove unnecessary planning constraints by accelerating the expansion of electric vehicle charging infrastructure and will consult on amending the National Planning Policy Framework to ensure the planning system prioritises the rollout of EV charge points, including EV charging hubs.

Ken McMeikan, CEO of Moto Hospitality, said: “I am extremely encouraged by the Government’s decision to transform the planning system in favour of delivering low-carbon energy projects and the prioritisation of EV charging hubs. This will go a long way to removing some of the biggest barriers that industry has been facing within EV and is very positive news for everyone involved in driving forward the electric future on the UK’s roads.”

“Alongside this, the acceptance of the Winser review’s recommendations in full to significantly increase capacity and access to power for businesses like Moto, is vital to allow us to continue to invest in rapidly expanding our network of ultra-rapid chargers at sites across the UK.

“This goes right to the heart of what Moto has been calling for and we are delighted that many of the actions we called for in our ‘Motofesto’ have featured in the Chancellor’s Autumn Statement.

“While we wholeheartedly welcome the announcement, accelerating the availability of sufficient power to major travel hubs like motorway service areas needs to be made a national priority and we stand ready to work with the Government during its consultation to feed into its plans and ensure they are delivered as quickly and effectively as possible.”

However, there were no specific announcements on charge point funding or EV incentives and ALD Automotive | LeasePlan MD Alfonso Martinez said he was disappointed in the Government’s lack of policies.

“A robust charging network is vital as the UK’s electric vehicle market gathers pace. While it’s true that the number of public charge points is growing (a further 14,255 have been installed so far this year, a 38% increase on the end of 2022), it’s also true that the rate of growth isn’t fast enough. According to an analysis published by The Times newspaper earlier this year, the Government is set to miss its target of installing 300,000 new charge points by 2030… by 20 years.

“However, the Autumn Statement offered no additional funding to grow this network – nor any support for home charge points, or local authority schemes which are equally vital to help encourage drivers to go electric. With mandatory zero-emission sales targets due to be introduced in 2024, urgent action is needed to alleviate drivers’ concerns.”

He also highlighted that the Government has ignored industry lobbying to reduce the 20% VAT rate on public charging to match the 5% paid for domestic energy.

“This would undoubtedly help to stimulate retail demand for EVs, especially in the used market where supply is growing quickly but drivers have few incentives to switch.”

And Martinez also expressed concern about the incoming reforms to Vehicle Excise Duty, which will mean that the VED exemption for electric cars (and discounts for hybrids) will end on 1 April 2025 along with the Expensive Car Supplement exemption.

“Electric vehicle prices are falling, but plenty of new models are still over the £40,000 threshold – including the UK’s best-selling EV, the Tesla Model Y. As rates rise with inflation, this system will leave drivers with a tax bill of around £600 per year for an electric vehicle, or three times more than the petrol or diesel equivalent. The Chancellor should consider adjusting the threshold to account for the still-higher price of EVs or exempting them altogether.”

Fleet Operations’ David Bushnell also slammed the Autumn Statement’s lack of EV support.

“Following the recent decision to delay the ban on the sale of petrol and diesel cars and vans, there had been high hopes that significant measures would be announced by the Chancellor to help counteract the impact of this by incentivising EV adoption. But this was not forthcoming in any meaningful way, and once again, has proved a missed opportunity.”

David Savage, vice president, UK + Ireland at Geotab, also commented, saying: “It’s disheartening to see that recent initiatives to attract electric car manufacturers appear to have overlooked the broader, more significant goals for the UK, such as electrification.

“We need further incentives to aid the future of zero emissions, ahead of 2050 net zero ambitions, and while the announcement of allocating funding for companies to manufacture batteries for electric vehicles is a welcome move, it merely addresses a fragment of the challenges faced within the electric vehicle sector.

“It’s crucial to not only support the production of EVs, but also ensure their efficient operation and integration into our transportation systems, which will require a much broader focus on innovation and smart infrastructure solutions.”

Scott Haddow, chief executive officer at Nexus Vehicle Rental, said the failure to address charging infrastructure was “short-sighted and will still act as a barrier to EV adoption for many vehicles”.

“Investment in EV infrastructure would fuel the growth of the electric vehicle market, create jobs, stimulate the economy, and establish our country as a global leader in the clean energy transition. The development and investment in this necessary infrastructure should be kept high on the agenda, playing a significant role in plans to achieve net zero by 2050.”

And Philip Nothard, chair, at the Vehicle Remarketing Association (VRA), pointed out a lack of additional help to support electric cars in the used car sector.

“We know that large numbers of EVs are about to enter the remarketing cycle and that there isn’t necessarily the demand in the market to soak up that volume. Measures such as subsidies or interest-free loans may be needed at some point before the end of the decade.”

Concern for tax tables

ALD Automotive | LeasePlan has warned that it’s seeking urgent clarification following publication of the Overview of Tax Legislation and Rates (OOTLAR), which includes a company car tax table that contradicts policy laid out during last year’s Autumn Statement.

“This indicates a 7% tax band for electric cars during the 2027/28, instead of the 5% announced by the Chancellor, and appears to have been published in error.

“If this figure is correct, then it undermines the integrity of the process. OOTLA is intended to show the effect of the changes, not to announced policy decisions. Fleets depend on long-term visibility to make investments, and it would be very disappointing to see a U-turn on incentives announced last year.”

Other announcements:

• Van Benefit Charge and Car & Van Fuel Benefit Charges – These will be maintained at 2023/24 levels for 2024/25.
• VAT Treatment of Private Hire Vehicles – The Government will consult in early 2024 on the impacts of the July 2023 High Court ruling in Uber Britannia Ltd v Sefton MBC. Addison Lee – which says it’s the only major operator to apply VAT on the full fare paid by its passengers – welcomed the commitment.
• £50m for pilots for apprenticeships in engineering and skill shortage areas
• New Investment Zones in the West Midlands, East Midlands and Greater Manchester – which was greeted by the West Midlands Gigafactory joint venture.

Autumn Statement reaction from the fleet sector

Paul Hollick, chair, AFP

“The public finances are in slightly better shape than expected and inflation is now below the prime minister’s stated 5% target, so this Autumn Statement was very much about cementing the idea – if not necessarily the reality – of economic recovery ahead of next year’s election.

“The measures taken, especially those to encourage investment, are to be welcomed in general terms and some businesses operating fleets will no doubt take advantage of them. However, it doesn’t change the underlying truth that the economy remains in pretty poor shape and that while inflation is falling, it remains relatively high. There’s also little in there to specifically support the motor industry or the fleet sector, although the £2bn allocated to EV manufacturing is to be welcomed and the planning changes for chargers could potentially speed rollout.”

Edmund King, AA president

“To help smooth the electrification journey, the AA welcomes plans to speed up access to the Grid, investment in zero emissions within the automotive industry and funding to attract new engineers into the sector.

“We would still like to see incentives for drivers to help them to take part in the zero-emission transition when they are ready to do so. Hopefully these incentives, a further freeze in fuel duty, and a cut in Insurance Premium Tax will be outlined in the Spring Budget.”

Peter Golding, managing director, FleetCheck

“This is probably the kind of Autumn Statement you’d expect from a government that will be facing a general election sooner rather than later.

“Its big moves were the NI cut designed to make consumers feel as though their finances are improving and the full capital expensing, designed to boost investment and the economy. All of these are reasonable moves and should have some positive effects but there was little here that will help the fleet industry specifically and the general backdrop is one where the drag and damage caused by everything from Covid to Brexit have all had very real effects.

“The next couple of years will be difficult for fleets, with budgets under pressure and an ongoing need to minimise costs, although we are sure that fleets managers will show their customary ingenuity and dedication in tackling these issues.”

Jon Lawes, managing director at Novuna Vehicle Solutions

“Policymakers have been sending mixed signals on the UK’s transition, so the plans announced in today’s Autumn Statement to earmark £2bn for zero-emission vehicle development, reform electricity grid access and support business investment are welcome.

“Now the Government must show how this will lead to concrete outcomes, including with its promised consultation on fast-streaming EV charging rollout. There is an urgent need to boost net zero infrastructure around the UK, and improve EV purchase incentives. It is vital that these measures translate into local investment which provides businesses and consumers with the confidence to make the switch.”