Budget 2013: Motorists get a breather

Budget 2013: What it means for you

UK motorists have been delivered a boost. George Osborne has scrapped September's fuel duty hike. For a car such as a Vauxhall Astra or Ford Focus, Osborne claims, that will be worth around £7 every time the tank is filled.

However Capital Economics claims that this will likely cost the Treasury £0.7bn. What about other good news for drivers?

Break for UK drivers

Osborne claims there will also be new tax incentives for ultra low emission vehicles, though details are scant currently. The AA claims had Osborne had gone ahead with the hike it would have lifted the cost of a 70-litre Ford Mondeo tank of petrol from £97.12 to £99.64 (based on the current average UK petrol price of 138.74p a litre). So some relief for British motorists.

The move also mean that the Government has frozen every scheduled fuel duty rise scheduled since 2010. The cancellation of the 3p increase on litre of petrol and diesel means the cut will be retained at 57.95p until at least the autumn of 2014.

Not enough?

"This was a cost of living Budget," said Harlow MP Robert Halfon. "It has put fuel in the tank of the British economy. I'm glad that the Chancellor has listened again, and helped the millions of car-owners and businesses who are struggling to fill up their family car. Fuel duty is a toxic tax. It hits the poorest Brits the hardest. We have to keep petrol and diesel prices down."

The UK Fair Fuel campaign welcomed the move. "It is a sign that the Government is listening, but there will be widespread disappointment that the cancellation of this duty rise gives them no immediate relief from climbing fuel prices. Cancelling a rise that really shouldn't happen is not enough."

Company car changes

"The Government," added Fair Fuel campaigner Quentin Wilson, "needs to cut duty substantially to get the economic growth we all need."

Green Flag said that while "the cost of motoring is a constant concern, it will be a relief to millions of motorists that there is some respite against the escalating financial burden of owning and running a car."

For company car drivers, Osborne is introducing two new benefit-in-kind bands. One will be for ultra-low emission vehicles in a 0-50g/km CO2 band; the second band will go from 51-75g/km CO2. This means a 5% band for 2015/16 and 9% for the higher band. Following years will see further rises.

Treasury fuel duty receipts – financial years - AA figures

2011/12 - £26.80bn from 50.60 billion litres of fuel
2010/11 - £27.26bn from 51.70 billion litres of fuel
2009/10 - £26.20bn from 52.83 billion litres of fuel
2008/9 - £24.62bn from 54.15 billion litres of fuel
2007/8 - £24.91bn from 56.17 billion litres of fuel
1997/8 - £19.46bn from 57.59 billion litres of fuel
1991/2 – £10.99bn from 63.40 billion litres of fuel

Budget 2013: Winners and Losers
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Budget 2013: Motorists get a breather

The Chancellor has cut the price of beer. He said a planned 3p rise in beer duty tax was being scrapped and replaced by a 1p cut on a pint of beer.

While lower interest rates are intended to boost borrowing for business and keep costs down for mortgage customers, the Chancellor brings another Budget devoid of encouragement for savers. Faced with near 0% interest rates and 3% inflation, there is no help for those who need to save for the future, or those that already live on their savings in retirement.

"Low interest rates are making life ever harder for people reliant on their savings. Their spending power is being reduced and their standard of living eroded on a daily basis," said Simon Rose of Save Our Savers. "The attack on savers is short-sighted and undermines the country's prospects for investment, growth and retirement."

A major headline-grabbing measure to help struggling first-time buyers is the new Help-to-Buy scheme. Made up of two parts, the first commits £1.3bn to shared equity loans that enable first-time buyers to borrow up to 20% of the value of a new build home towards a deposit, providing they can contribute 5% themselves. The loans will be interest free for five years and be repayable on house sale. The scheme will cover all new properties up to £600,000 in value – around 90% of all new homes in the UK.

The second is a Mortgage Guarantee for lenders, intended to help all families who are struggling with deposits. The scheme will make £130bn worth of mortgages available from 2014 and enable lenders to offer loans at higher-to-loan value, which will Mr Osborne said will "dramatically increase" the availability of mortgages. The guarantee will run for three years and apply to bold old and new property. Stephen Noakes, Mortgage Director at Lloyds Banking Group, commented: "We are very supportive of innovation in the housing market and believe that the mortgage guarantee scheme, will give a much needed boost to the housing market and most importantly address the issue of accessibility. "Crucially, this scheme will not only help first time buyers but also second steppers, a key segment of the housing market that is also in need of more support and attention. Whilst the property market is likely to continue to be challenging, the fresh support announced today will have a real knock on effect across the whole of the housing market and we expect it could help around 50,000 people a year."

Payment of taxes is the "glue that holds the economy together" the Chancellor said as he reaffirmed his commitment to crackdown on evasion and the professional services that advise on it. "With more measures to rein in Corporate Tax avoiders, the Chancellor has sent a clear message that aggressive avoidance is no longer acceptable," said Martin Hook, Managing Director of research and development tax specialists, Alma Consulting Group. "This will have a significant impact on the Big 4 and other firms who market tax avoidance schemes and will need to consider the morality of the schemes that they sell and the spirit of the tax legislation."

As was widely predicted, Osborne froze the fuel duty hike due in September 2013. He announced that his repeated scrapping of this duty has saved the average Ford Focus owner £7 on every tank of petrol.

Stating his commitment to helping entrepreneurs get ahead and recognising that the cost of employing people is a huge burden to small firms, the Chancellor announced a surprise move with National Insurance relief of £2,000. Called the Employment Allowance, he said the new measure means than 450,000 small businesses – which account for one third of all companies in the UK - can employ one person earning £22,000 or four people earning the minimum wage, without paying National Insurance.

"The Employment Allowance will certainly be a massive boon for small businesses. Not least because most weren't really expecting it," said Jonathan Elliott, managing director of MakeItCheaper.com. "Put it another way, a £2,000 saving for a typical small business is the equivalent of cutting their annual energy bill in half or putting 1,250 litres of free fuel in its fleet of vehicles." Yet the Government fell short on support for new enterprises, explains John Williams from Kuber: "Noticeably absent from the Chancellor's speech was any news of extending or enhancing the Enterprise Investment Scheme (EIS). Many were hoping to see the Government offer more help to start-up companies looking for second round finances, but nothing materialised."

There was bad news for public sector workers, who will see pay increases limited to 1% in 2015/2016. The government will also revisit 'progressive pay' which sees pay increase automatically each year which he said was 'difficult to justify' given that private sector pay has been frozen or cut. The armed forces, however, will be exempt from this.

Feeling the pressure on help working families, the Chancellor made a welcome announcement that working parents will receive a contribution from the Government towards the cost of childcare. Working parents will receive 20% - equivalent to the basic rate of tax - of their yearly childcare costs, up to a total of £6,000 per child. He said the move will save a typical working family with two children under 12 up to £2,400 a year.

Also, leaked this morning was the news that the Chancellor will raise the income tax threshold to £10,000 from April 2014 – a move he said will give 2.4million people at tax cut of over £200 each a year, as well as lifting two million people out of income tax altogether.
Yet while both moves are widely welcomed, they do little to counter the austere measures of previous Budgets, explains Clare Francis, editor-in-chief at MoneySupermarket.com:"Giving with one hand may be a positive, but taking away with the other through other tax increases and benefit cuts means that people are no better off. "In fact, the cumulative effect of this and previous budget changes, combined with wage stagnation and rising living costs means millions are worse off and an increasing number of families are on the breadline, struggling to make ends meet every month."
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