Pre-Budget 2008

AA calls on government to help motorists

21 October 2008

a car tax disc

Keeping down the cost of motoring is essential in helping the country pull out of the current financial crisis, according to the AA. The AA president has written to the Exchequer Secretary to the Treasury, Angela Eagle MP, demanding action to help motorists. This comes amidst growing speculation that the Chancellor may look to increase fuel duty at the next budget.

The AA welcomed the Prime Minister's recent call for petrol companies and retailers to quickly pass on fuel price reductions to the motoring public and warns against the Government taking away these reductions by increasing fuel duty.

The AA raised several issues with the Treasury.

Motoring costs

The recent high fuel prices have affected 77% of AA members in terms of cutting back on journeys, cutting other expenditure or both. Families and business need a period of fuel price stability and therefore the chancellor should continue the fuel duty 'freeze'. This would help stimulate other spending in the economy and also help restore some business confidence.

The time is not right for a duty increase but in the future when duty is increased motorists will want to see benefits in terms of improved road maintenance and measures to reduce congestion.

Vehicle excise duty

The AA remains particularly concerned by the retrospective nature of the proposed VED changes. The impact of proceeding with these changes will be on those who have large cars for their needs but who can least afford to change them. In some areas of the country this affects ethnic minority groups who have extended families but use their vehicles efficiently. The AA hopes that changes can be made to these proposals.

Volunteer drivers

The AA hopes that the Chancellor may give consideration to increasing the approved mileage rate, currently 40p per mile, particularly to help volunteer drivers.

Car scrappage scheme

The AA is calling upon Government to introduce a cash incentive scheme to encourage motorists to replace old cars with new ones as new car sales dropped 21% in September. The AA claims this would help reduce vehicle emissions and add a needed boost to new car sales.

The current Vehicle Excise Duty (VED) system gives an incentive for motorists to hold on to pre-2001 cars particularly if they want a more powerful and bigger car. There are two flat rates of VED for pre-2001cars, one below 1,549cc and the other above. These vehicles tend to be the gross polluters and tend to be less roadworthy and less safe.

To overcome problems of the French scheme where old cars that had not been used for years were cashed in, this scheme should rely on DVLA data to show that the car is pre-1996 and has been on the road for at least the last 12 months. In subsequent years the scheme could be rolled out to pre-97, 98 etc. Average new car CO2 emissions have fallen by 13 per cent since 97, so any like for like replacement will mean significant improvement. Also the market shift towards diesel would suggest an even greater benefit.

In the scheme a £500 voucher against the purchase of a new car would be awarded. The motorist would take the old vehicle to the dealer and the dealer would offer the £500 discount plus an additional discount which would be increased to cover the scrap value. The AA estimates that there are approximately 4.26 million pre 1996 cars or 14% of the car parc.

Advantages of a scrapping scheme

  • Incentive to get older cars off the road
  • 28% of motorists say they would consider using an incentive scheme to scrap older cars (AA Populus survey)
  • Removes gross polluters
  • Removes less safe cars and replaces them with safer vehicles
  • Helps motor industry by increasing sales
  • Cost minimised as Treasury benefit from new car sales tax, VAT and lower accident rates
  • Builds confidence in new car market
  • Benefits low income motorists
  • Re-cycles cars that would otherwise be dumped or used by motoring underclass

Comment

Commenting, Edmund King, AA president, said: "Motorists are getting some temporary relief at the pumps but continuing to hold down the cost of motoring is essential for the economy and control of inflation. The Prime Minister has encouraged petrol retailers to cut costs so it would be unhelpful if the government increases costs by hiking up fuel duty. The Government should also take decisive action to scrap their plans for retrospective road tax.

"A vehicle scrapping scheme has potential to reduce emissions, reduce accidents and their severity whilst giving a boost to the UK motor industry. There are many benefits from getting older gross polluters off the road from environmental to safety. In terms of cost such a scheme could be self-funding as the Government will benefit from new car tax, VAT and reduced carbon and accident costs. The UK economy would also benefit from an increase in new car sales."

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