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What the budget means for car sales

By raccars Published

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Will new or used car sales be affected by George Osborne's latest and most controversial budget?

The dust has yet to settle on Chancellor George Osborne's latest Spring budget, announced on March 16 and which has already seen the resignation of one senior Cabinet minister. As the fallout continues in various areas, how will car sales and car ownership be affected by the changes announced in the House of Commons last week?

Fuel duty frozen for the sixth year

The main news for British drivers is that fuel duty was frozen for a sixth consecutive year. There had been speculation that fuel duty would increase in line with inflation but Osborne claims that his budget has protected drivers and small businesses and will help to keep Britain moving. The freeze could save the average driver about £75 annually and small businesses £270 per year. This good news somewhat obscures the fact that 74 per cent of the price of diesel already goes to the Treasury and that revenue from fuel duty on petrol and diesel vehicles reached £27.4 billion last year.

Insurance Premium Tax up again

The Chancellor also made claims about using his budget to prepare the country for the future to justify an increase in Insurance Premium Tax (IPT). This was the second consecutive hike in IPT and was largely expected. November's Autumn Statement saw IPT rise from 6 per cent to 9.5 per cent and last week's statement took that up another 0.5 per cent to 10 per cent. This equates to an extra £700 million of revenue which is to be dedicated to investment in flood defences. It's only a small increase but insurers are certain to pass on the extra cost on to car owners in the form of higher premiums on their car insurance. Breakdown cover will be affected also.

Road network improvements

Osborne also announced some road network updates in the 'northern powerhouse' area. These include the M62 which will benefit from a new four lane stretch; a Manchester to Sheffield tunnel; and some improvements to the A69 and A66. The price of entering Wales via the Severn Crossing will also halve by 2018.

Autonomous driving car sales and technology a priority

The Spring Statement also saw the Chancellor confirm the Government's commitment to the introduction of autonomous driving technology and its associated legislation and to ensuring that the UK remains at the forefront of connected and autonomous vehicle research and development. The plan is to conduct driverless car trials on public roads by 2017 and to conduct a major consultation as to how to ensure the regulation of autonomous vehicles on Britain's major roads. A 'connected corridor' is to be established between London and Dover at a cost of £15 million which will see vehicles communicating wirelessly with each other and the surrounding infrastructure.

The automotive industry generally reacted positively to the Spring budget. Chief engineer at the RAC, David Bizley, expressed his approval on the behalf of British motorists for the freeze on fuel duty but was disappointed that the Chancellor didn't indicate plans to continue the freeze for the duration of this Parliament.

The RAC Foundation's director, Steve Gooding, was equally pleased on behalf of British households that motoring expenditure won't be adversely affected by the new budget. The SMMT was pleased by Mr Osborne's support for clean motoring technologies by extending the Climate Change Agreements. The society also welcomed a proposed consultation on how company car tax is calculated on ultra low emissions vehicles.

The insurance industry was less impressed by the increase to IPT but car manufacturers welcomed the Chancellor's support for driverless motoring.

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