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How the Budget affects motorists

  • VAT up to 20% on January 4
  • No new increase in fuel duty
  • but rises are still on the cards
Words By What Car? Staff

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The 2.5% VAT increase was the biggest blow to motorists in the emergency Budget delivered by the Chancellor George Osborne.

400 more for a Ford Focus
The VAT increase from 17.5% to 20% will come into effect on January 4, 2011, and will add more than 400 to the price of a small family car such as the Ford Focus.

Fuel prices up, too
Although there are no new increases in fuel duty, the previously announced increase of a penny this October and 0.76 pence next January will also be subject to the higher VAT rate when it's introduced.

Using today's average pump prices, the AA says the fuel duty increases combined with the rise in VAT, adds more than 4.5p to prices, resulting in 122.93p a litre for petrol and 125.43p for diesel.

The owner of our favourite Ford Focus, a 1.6-litre TDCi Style, would spend an extra 41 annually on fuel, when based on the average fuel consumption figure. That's nearly as much as five years' worth of average council tax rises in just six months.

Insurance and breakdown costs
Car insurance and breakdown cover costs are also set to rise due to a 1% increase in insurance premium tax. It also comes into force on January 4, 2011.

The AA said it was concerned that the tax rise increased the danger that an uninsured 'motoring underclass' could be created.

AA president, Edmund King, said: 'My greatest concern was that a large increase would have led to large numbers of people attempting to drive their cars without insurance, but even a 1% increase will make premiums unaffordable for some.'