Budget 2012: What drivers can expect

* Fuel duty rise possible * Future VED rates set to be outlined * Industry calls for consistency and measured announcements...

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Tom Webster
14 March 2012

Budget 2012: What drivers can expect

Chancellor George Osborne will deliver the 2012 Budget on March 21. Despite the soaring cost of fuel, the UK's motorists have actually got off relatively lightly in recent Budgets. Last year, the Chancellor even cut fuel duty by 1p a litre.

However, what can the country's drivers expect in 2012?

Fuel duty
The big question most drivers will be asking is whether Osborne will continue the Treasury's lenient stance towards fuel taxation, or if he'll need to raid motorists' wallets.

A fuel duty rise was planned for January this year, but that was cancelled. A further 3p increase is currently due to arrive in August.

At this point there is no indication if this increase will be pushed through in the Budget. Some experts feel that he might cut fuel tax further to ease the burden on motorists, but a spokesman for the Society of Motor Manufacturers and Traders (SMMT) said: 'There has been a suggestion that there will not be any reductions in duty, but it has not been said whether it would go up or not.'

Accordingly, the SMMT has called for Osborne to: 'Deliver stability and certainty on motoring taxes and duties. This is not the time for short-term radical changes, or substantial rate increases.'

PricewaterhouseCoopers' tax expert Alex Henderson agrees, saying: 'We think a reduction in fuel duty is unlikely because reductions are more likely elsewhere in the Budget.'

Company car tax (Benefit in Kind)
This is something that the Chancellor is almost certainly going to cover in his speech, as Nathan Male, director at Deloitte Car Consulting, said: 'We would expect the publication of company car tax tables for the next few years and would expect the same trend of changes to continue.'

This would mean minor changes to the company car tax bands where drivers of higher-emitting cars are charged more from 2015 onwards.

According to Male, there might also be an increase to the amount of company tax that employees have to pay if they get a personal fuel allowance from work.

'The BIK liability on company-funded fuel has increased year on year and is expected to increase from next tax year.'

However, Male and the SMMT have both urged the Chancellor to avoid drastic changes, to allow motorists to plan their future car choice.

'We have seen over the past two or three years that there has been a clear message that choosing low CO2 cars puts you in a favourable position,' said Male.

The SMMT also wants to see rewards continue for those who have opted for a certain type of car.

'The incentives need to stay in place,' said an SMMT spokesman. 'For example, a business car buyer investing in a certain type of car shouldn't be stung when their tax is hiked up.'

VED (road tax)
Again, it's unclear what Osborne might do with road tax. Nathan Male said Deloitte has not been party to whether there will be any changes to the cost of tax discs.

'If it follows the position of company car tax we may see a tightening going forward,' said Male.

While the hope will be for the Chancellor to continue his relatively forgiving approach to motorists in terms of fuel duty, nothing looks certain this year. However, PricewaterhouseCoopers' Alex Henderson reckons there might be a big announcement on the future of the road network.

'This is a budget where the Chancellor could set out longer term goals,' he said. 'He could set out a move from fuel duty to a road-pricing system for the future.'

This, says Henderson, would make people pay tolls to use the motorways in a similar manner to the European road network.

'The technology is there, and it would result in a more efficient use of the roads. It would be a major disruption but we could see a government move towards this at one point.'

However, he says that he has 'no inside track on that' but it is something PwC believes makes economic sense.

Looking at the more immediate future, motorists will be hoping it is something like this that makes the headlines rather than a more immediate increase in costs.

Tom Webster