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HMT/DETR 1

21 March 2000

BUDGET SETS BRITAIN ON ROAD TO BETTER TRANSPORT AND ENVIRONMENT

Budget measures to boost the transport network and benefit the environment were set out by Chancellor Gordon Brown today.

Budget 2000 will help underpin the Integrated Transport strategy by providing additional funding to improve the transport network, creating incentives for cleaner vehicles, reducing congestion and boosting the competitiveness of the UK haulage industry.

£280 million for additional transport spending, a £55 cut in Vehicle Excise Duty (VED) rates for 2.2 million smaller cars, and reductions of up to £70 in the VED rates for 95 per cent of new cars are amongst the measures announced by the Chancellor today.

MORE MONEY FOR ROADS AND PUBLIC TRANSPORT

In his November Pre-Budget Report, the Chancellor announced that he would consider the appropriate rate of fuel duties on a Budget-by-Budget basis, taking into account all the relevant economic, social and environmental factors.

Given the increase in oil prices from $23 a barrel to $30 since the Pre-Budget Report, the Chancellor has decided for this Budget that, other than the automatic inflation rise of around 2 pence a litre, there will be no increase in road fuel duties.

The Chancellor also recognised the case for investment in the road network and public transport system, and has therefore made £280 million available for additional transport expenditure across the UK to tackle congestion hot-spots and modernise public transport. Every region will benefit from new investment in its transport infrastructure. The Deputy Prime Minister will shortly announce details of projects this money will support.

INCENTIVES FOR CLEANER CARS AND FUELS

Budget 2000 announces a range of measures which will encourage the take-up of more environmentally-friendly models of car, and ensure that the less cars pollute, the less tax their owners will pay:

• from 1^st March 2001, the reduced rate of Vehicle Excise Duty (VED) for existing cars will be extended from the current threshold of 1,100cc to cars with engines up to 1,200cc: giving a £55 cut to owners of an extra 2.2 million smaller cars;

• also from March 2001, all new cars will go into one of four bands based on their rate of CO2 emissions, with 95 per cent of new cars paying up to £70 less under this new VED system than under the rates for existing cars;

• the VED rates for existing cars will not rise in real terms, and will be frozen for a year until the extension of the reduced rate on 1^st March 2001. In total, the changes to car VED announced in this Budget will cut the tax cost of car ownership by almost £250 million in 2000-01;

• from April 2002, the tax charge on company cars will also be graduated according to their rate of CO2 emissions (see REV 6); and

• the successful policy of setting differential rates of fuel duty to encourage cleaner fuels will continue with:

- a 1p per litre incentive for ultra low sulphur petrol to take effect from a target date of 1^st October 2000; and

- a freeze in duty on road fuel gas.

BOOSTING COMPETITIVENESS AND REDUCING CONGESTION

Budget 2000 contains a package of measures, including lorry VED cuts worth £45 million, designed to boost the competitiveness of UK hauliers while helping to relieve the road network from the damage and congestion which lorries can cause:

• road-friendly 44-tonne/6-axle lorries will be introduced at a low VED rate, easing congestion, boosting the competitiveness of domestic UK hauliers, and allowing the Government to cut £1,800 off the VED rate for the 40-tonne/5-axle lorry used by the UK's international hauliers;

• VED will be cut by £500 for the most popular heavy lorry and a lorry typically used for collecting freight from ports, and frozen for almost all other lorry types for the third year running - a cut in real terms; and

• tougher enforcement against 'cowboy hauliers' to protect the competitiveness of legitimate hauliers, including legislation in the Transport Bill to allow the impounding of their trucks.

Gus Macdonald, Minister for Transport said:

"This Government is determined to deliver a better transport system and to protect the environment. Today's Budget shows we mean business.

"Today's additional investment supports the policies outlined in the Integrated Transport White Paper, and points the way towards July's Ten Year Transport Plan, which the Deputy Prime Minister has asked me to prepare. This will set out the long-term strategy and investment needed to deliver on our promises and build a modern integrated transport system.

"The DVLA will shortly be launching a publicity campaign to emphasise to motorists that driving a more fuel-efficient vehicle will cut their VED and fuel bills, as well as helping the environment.

"The measures announced to boost the competitiveness of UK hauliers show the value of the work undertaken in the Road Haulage Forum over the past year to consider these competitiveness issues. We will carry on this work with the industry so that it can continue to inform the Government's decision making."

NOTES FOR EDITORS

Fuel duties and differentials

1. Rates of duty on petrol and diesel will increase in line with inflation from 6pm today. Duty on road fuel gases will be frozen. The new rates are set out in the table below, together with the effect of the total tax increase (duty plus VAT) on the price of a litre of petrol:

2. The Government intends to introduce a 1 pence per litre incentive for ultra low sulphur petrol from 1^st October 2000. There will be consultation with the industry and other interest groups on the exact specification for this new, cleaner type of petrol and the exact date of introduction.

3. Details for businesses are published in Budget Notice 62/2000 which is available from Customs and Excise Advice Centres and from www.hmce.gov.uk

Vehicle Excise Duty (VED) for existing cars

4. A reduced VED rate for cars was announced in the last Budget and introduced on 1^st June 1999 for all cars with engines up to 1,100cc. This gave a £55 VED cut to drivers of around 1.8 million cars. Engine size is the best available proxy for measuring the fuel-efficiency of existing cars.

5. From 1^st March 2001, the reduced rate will be extended to apply to all existing cars with engines up to 1,200cc - giving a £55 cut to an additional 2.2 million smaller cars, including around 700,000 models of the Ford Fiesta, 200,000 Vauxhall Corsas, 200,000 Vauxhall Novas and 200,000 Renault Clios.

6. VED rates for existing cars, taxis and vans will increase in line with inflation from 1^st March 2001: the reduced rate for cars with smaller engines will be £105; the standard rate will be £160.

VED for new cars

7. Also from March 2001, a graduated VED system for new cars will be introduced. Under this system, all new cars first registered from that date will go into one of four VED bands according to their rate of carbon dioxide emissions.

8. Within each band, there will be a £10 discount for cars using cleaner fuels and technology. Initially, this will include cars run on road fuel gas, bi-fuel and dual fuel cars, and cars using hybrid technology.

9. Within each band, there will also be a supplement for diesel cars to reflect their higher emissions of particulates and other pollutants which damage local air quality. The system will be built in a flexible way so that the treatment of diesel cars can be reviewed as their emissions standards improve.

10. The table below sets out the bands and rates for the new system, including some examples of where the most fuel-efficient models of popular new cars will go.

11. New light goods vehicles (e.g. vans) for which there is currently no carbon dioxide emissions data available will pay £160 VED.

12. Under this new system, 95% of new cars will pay from £5 up to £70 less than under the rates for existing cars. Petrol models of Britain's best-selling new cars - the Ford Focus and Fiesta - will pay up to £40 less; while petrol models of the Vauxhall Astra, Rover 400 and Ford Mondeo will pay up to £20 less.

13. The new graduated VED system will therefore encourage the use of new cars as opposed to older cars, cars with lower CO2 emissions and better fuel-efficiency, and cars using cleaner fuels and technology.

Implementation and publicity for changes to car VED

14. In response to requests from motor manufacturers and traders for additional time to prepare, the Government has extended the timetable for introduction of the graduated VED system for new cars from Autumn 2000 to March 2001. This will coincide with the introduction of Y-registration number plates so it will be easy to distinguish cars which will pay VED under the new system.

15. The DVLA will continue to work with manufacturers, traders and other bodies throughout the year to collect the information and introduce the systems on which the new scheme will be based. Further details about the new system can be found on www.dvla.gov.uk/newved

16. To ensure public awareness and understanding of the new system, DVLA will be launching an extensive publicity campaign to explain the changes and promote the financial and environmental benefits of choosing cleaner cars: not only from cutting down on VED and fuel bills, but also from cutting down on emissions of carbon dioxide and local air pollutants.

17. For the extension of the reduced rate threshold to 1,200cc, DVLA will be putting into place a special, customer-friendly rebate scheme. From March 2001, all owners of newly-qualifying vehicles who have licensed their car at the standard £155 rate during 2000-01 will receive a £55 cheque in the post as a reward for driving a smaller, cleaner car.

Introduction of 44-tonne lorries

18. Acting on the unanimous recommendations of the Commission for Integrated Transport (CfIT), the Government has decided to allow 6-axle lorries meeting Euro II emissions standards to use UK roads at new 44-tonne weight limits. A target date of 1^st January 2001 has been set for their introduction: the final date will be confirmed in July's ten year plan in the context of wider freight policy.

19. 44-tonne lorries are no bigger than existing lorries, but are simply allowed to carry heavier loads. They do less damage to roads than existing 40-tonne/5-axle lorries because of their better weight distribution. CfIT's report on 44-tonne lorries (published on 6^th March) can be found at www.cfit.gov.uk. It also recommends improvements in the current enforcement regime and to rail freight.

20. Talking of his decision to introduce 44-tonne lorries, Lord Macdonald said:

"CfIT has carried out the most thorough analysis of the 44-tonne issue in 20 years. They have considered the issue in terms of the best environmental outcome, and concluded that there would be a small but significant net gain to the environment from allowing 44-tonne lorries. This approach of looking for the best environmental options is at the heart of our integrated transport policy.

"I accept CfIT's conclusion that 44-tonne lorries will mean fewer lorry journeys are needed to carry the same amount of goods, which they say is equivalent to removing 230 return journeys from London to Edinburgh every day. It is in no-one's interest to have empty space in lorries running around our roads when that space can be filled without penalties in terms of pollution or safety."

VED for lorries

21. A VED rate of £2,950 has been set for the new 44-tonne/6-axle lorries, which will take effect from a target date of 1^st January 2001. The other changes to lorry VED, which take effect from 6pm on Budget day, are set out in detail below. They will cost a total of £45 million per annum, with major VED cuts targeted at areas of the haulage industry which are under the most competitive pressure:

• the VED rate for the road-damaging 40-tonne/5-axle lorry will be cut by £1,800 from £5,750 to £3,950 to boost the competitiveness of international hauliers who need to run at 40-tonnes due to continental weight limits;

• a £500 cut in the VED rate for the UK-standard 38-tonne/5-axle lorry from £3,210 to £2,750 to encourage hauliers to continue using this lorry;

• a £500 cut in VED from £4,250 to £3,750 for the 41-tonne lorry capable of being used with up to 3 trailer axles - a lorry typically used by smaller operators collecting freight shipped 'unaccompanied' to UK ports;

• rates will be frozen for almost all other lorry types except for the 36-tonne on 5-axles (cut by £500 in line with the 38-tonne) and for lorries currently paying £155 or £160 which rise in line with the standard car rates.

Enforcement against 'cowboy hauliers'

22. To protect the competitiveness of legitimate UK hauliers, the Government is taking forward a number of measures designed to impose more stringent checks and penalties on those who operate illegally and to lessen the compliance burden on legitimate hauliers. These include:

• the addition of legislation to the Transport Bill to allow for the impounding of illegally-operated lorries;

• a review by a sub-group of the Road Haulage Forum aimed at improving the targeting and effectiveness of current enforcement efforts, which will also consider CfIT's recommendations in this area;

• a major project to improve the IT systems of the Traffic Area Offices, enabling improved levels of service to operators, co-operation between enforcement agencies and more efficient targeting of enforcement, benefiting both road and vehicle safety and legitimate hauliers;

• the enforcement of tough new rules brought in last year on access to the haulage profession, including more challenging tests for the Certificate of Professional Competence required by haulage operators; and

• tighter rules on use of rebated 'red diesel', and tougher penalties for misuse.

Other transport measures

23. Details of the company car tax reforms are set out in press notice REV 6 or can be seen at www.inlandrevenue.gov.uk/cars

PRESS ENQUIRIES should be directed to the DETR Press Office on: 020 7890 3066

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