In the shadow of Coronavirus, Chancellor of the Exchequer, Rishi Sunak, unveiled the government’s 2020 spending plans last week. While many of the headline-grabbing announcements were about COVID-19, there were also a number of new initiatives that will impact the automotive industry and motorists.

Fuel Duty

There was wide speculation that the Chancellor might announce the first rise in fuel duty in nearly 10 years, especially in light of recent plunges in the price of oil,  but he decided to maintain the freeze for this year. This has proven a controversial decision as it appears inconsistent with the government’s aim of banning the sale of new petrol and diesel cars from 2035. Raising fuel duty was seen as one of the key tools that the government could use to encourage the public to transition away from petrol and diesel cars. It now appears the government is instead relying on making electric vehicles cheaper in order to bring about this change.

End of the ‘red’ diesel subsidy

As part of the government’s aim to cut emissions, the Chancellor announced the end of subsidies for ‘red’ diesel from 2022, which is used in off-road vehicles in the mining and construction industries. This decision was prompted by the fact that vehicles using ‘red’ diesel are some of the most polluting in the UK, accounting for 10% of the most noxious gases polluting the air of cities like London. However, the rail, domestic heating, fisheries and agricultural industries will continue to receive the subsidy, buying them more time to transition to electric vehicles. The Chancellor cited plans to double the UK’s research and development investment as evidence of the government’s commitment to developing alternatives to ‘red’ diesel in the long-term. As part of this increased spending, a share of a £900m fund will be spent on supporting the development of electric vehicles.

Road infrastructure

The Chancellor announced £27 billion worth of spending on Britain’s roads over the next five years, including improvements to the A66 in the North East, a Lower Thames Crossing in the South East and a tunnel for the A303 near Stonehenge. He also announced £2.5 billion to fix potholes and resurface roads in England over the next five years. While this will be welcomed by drivers and the transport industry alike, concerns have been raised that the funds may not be enough to end the problem of potholes. The funding will break down to just £500 million a year and some have predicted this could leave a £157 million short-fall in annual funding, which could leave as many as 2.4 million potholes a year unrepaired.

Electric cars and charging infrastructure

To encourage the shift to electric vehicles, the Budget included £500 million to support the rollout of a super-fast electric charging network, it is hoped this will make charging away from home much faster for EV owners. Once the network is complete it would ensure drivers are never more than 30 miles away from a charging point, making long-distance journeys in electric models easier.

In a surprise move, the Chancellor announced the extension of the Plug-in Car Grant (PiCG) to 2023, this grant sees the government provide a discount to the cost of buying a pure- electric car. However, the grant has been trimmed down so that it now excludes cars costing £50,000 or more and has fallen from £3500 to £3000

In a final piece of good news for the industry, the levy on electricity will be frozen from April 2022 which should further ease the cost of charging electric cars, which are already cheaper to fuel per mile than diesel or petrol cars. Combined with the extension of the PiCG this helps to make electric vehicles a viable option for a broader portion of the population than is currently the case.

Support to businesses affected by Coronavirus

Many businesses, including those in the automotive sector, expect to be impacted by Coronavirus. In response the government has committed £7 billion to support the self-employed, small businesses and retail. This funding will include a new temporary Coronavirus Business Interruption Loan Scheme which will be used to support businesses placed under pressure by the effects of Coronavirus and will see the government guaranteeing up to 80% of bank loans, to encourage lending. The Chancellor also announced that statutory pay will now be paid from day one, not day four, and the government will refund up to 14 days of statuary sick pay for companies with under 250 employees.