Pre-Budget Report 2009

AA Response

9 December 2009

The AA response to today's statement by the Chancellor


The AA welcomed the fact that the fuel duty increase due in April 2010 has not been brought forward and welcomed incentives for electric cars.

The increase in VAT (back to 17.5% from 1 January 2010) will hit drivers at the pumps to give them a bumpy ride in the New Year according to the AA.

Based on current prices, the increase in VAT to 17.5% from January 1st will add 2.36p to a litre of unleaded petrol (from 108.91p to 111.27p), and 2.4p to a litre of diesel (from 110.17 to 112.57p). This will bring pump prices back to the highs of last autumn and add £61.41 to the annual fuel cost of a family with two petrol cars.

The AA welcomed initiatives to promote low carbon technology. The AA also supports plans to exempt electric vehicles from company car tax for 5 years and hopes that a good, affordable, stylish, well-performing, safe, longer range family electric car will come to market in the next few years.

Commenting, Edmund King, AA President, said: "The pre-budget report brings some relief but no Christmas cheer. We are pleased that the Chancellor has not brought forward the projected increase in fuel duty from April. Petrol and diesel in the UK are already heavily taxed so the VAT increase will hit drivers. This pre-budget report may have brought Christmas cheer for Bingo regulars but there is no "full-house" for the driver unless he has an electric company car.

"We welcome plans to exempt electric vehicles from company car tax for 5 years. However, most sales reps would struggle getting up and down the M1 in the current range of EVs available. Hopefully this will encourage motor manufacturers to bring an iconic electric vehicle to market as soon as possible. The AA hopes that a good, affordable, stylish, well-performing, safe, longer range family electric car will come to market in the next few years."

In the run up to the pre-budget report, the AA warned the Chancellor not to pull any "tricks out of his box" to hammer the motorist in a pre-Christmas stunt.

The AA pointed out that since the last pre-budget report fuel duty has already risen by 5.84 pence/litre so the Chancellor should not be looking to revise his plans on fuel duty.

Commenting, Edmund King, AA President, said: "Petrol and diesel in the UK are already heavily taxed so we don't want to see the Chancellor pulling any tricks out of his box to hammer the motorist. We are concerned that for political reasons he may try to get away with an immediate fuel duty increase rather than wait for the forecast 1p increase next April. This could hinder economic recovery because as a nation we are dependent on road transport for getting goods to our shops and ports and for 90% of passenger travel. It would also undermine consumer spending that will underpin economic recovery."

At the last Budget the Chancellor announced that fuel duty will increase by 1 penny per litre in real terms on 1 April each year from 2010 to 2013.

He also announced that on Vehicle Excise Duty, from April 2010, the Government will further separate out the thirteen different bands in order to strengthen the environmental signal, and from April 2010, differential First-Year Rates of VED (Showroom tax) for new vehicles would be introduced.

AA Pre-Budget Report Fact-File

  1. Fuel duty increases from last Pre-Budget Report(PBR) = 5.84 p/ltr. Tax-take with VAT at 15% = 6.72 p/ltr
  2. Impact on fuel prices: duty increases represent 42% of the rise in petrol prices from last PBR. Without the fuel duty increases, diesel would cost 4.5p less
  3. Impact on costs of one car: petrol – an extra £87.43 a year, diesel – an extra £69.48
  4. Impact on a two-car family – an extra £174.86 a year. (Average increase in Band D council tax 2009/10 = £41)
  5. On 1 January 2010, VAT will return to 17.5%

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9 December 2009