Autumn Budget 2017: A proposal from the AA

AUTUMN BUDGET 2017: A PROPOSAL FROM THE AA

November 2017

1

INTRODUCTION EDMUND KING OBE, AA PRESIDENT

Improving air quality in both the short and long term will shape motoring policy for decades to come. But the Chancellor should not use this Budget to punish diesel

drivers.

British drivers are at a crossroads, forced to choose between familiar petrol and diesel cars, of which new sales are set to be banned from 2040, and cleaner alternatives about which there are still concerns over reliability and charging infrastructure.

But the position we now find ourselves in is one of government's rather than drivers' making.

In the early 2000's, the then Labour Government encouraged drivers to purchase diesel cars to reduce CO2, and successive governments have continued to push the climate-change benefits of diesel.

The Spring Budget 2017 book said that policies to improve air quality will be paid for by tax changes to diesel cars. But there has been no consultation on possible policy measures and diesel car owners are rightly concerned.

Three quarters of motorists say that improving air quality is important to them, but eight out of 10 drivers also say that more incentives are needed to help people buy cleaner vehicles.

Herein lies the problem - how does the Government enforce the banned sale of new petrol and diesel cars by 2040 while car owners remain sceptical of the reliability and infrastructure of the alternatives?

A lot of work still needs to be done to persuade more drivers to choose electric and alternatively fueled vehicles, and the government should use this Budget as a catalyst to further encourage that positive change.

The Automated and Electric Vehicles Bill is a good starting point, but changing drivers' car buying behaviour on a large scale will require a large scale package of public investment.

For our submission we have focused our proposals on what our members have told us using our AA-Populus Driver Poll. Our 150,000 strong panel is the largest dedicated motoring panel in Europe and allows us to tap into the mindset of the UK driver.

Therefore, the AA calls on the Government to act on our proposals;

• Confirm that no new or retrospective taxes will be imposed on private diesel cars

• Cut Insurance Premium Tax (IPT)

• Continue the freeze in Fuel Duty

• Accelerate the introduction of Electric Vehicles and supporting infrastructure

The Autumn Budget can be a catalyst for change in improving air quality across the UK. We hope the Chancellor uses the opportunity to do so.

Should you have any questions regarding this document please contact:

01256 493493

[e-mail]

2

OVERVIEW OF THE AA

The AA has been around for over 100 years and was formed when a group of motoring enthusiasts met at the Trocadero restaurant in London's West End. This group was initially intended to champion the cause of the motorist and particularly to help motorists avoid police speed traps. As motoring became more popular, so did we - the AA's 100 members in 1905 grew to 83,000 by 1914. As AA membership expanded, so did our activities.

Today, the AA is the largest breakdown cover organisation in the UK with around 14 million roadside assistance customers. Other services and products we provide include: car insurance, telematics services, maps, travel guides, campsite guides, home insurance, savings accounts, smart phone and tablet apps. We have also expanded our roadside services to include assistance with mis-fuelling, lost or stolen keys, and batteries.

We have two driving schools, the AA Driving School and BSM, with a combined force of over 2,600 driving instructors.

We also represent our members' interests and have established Europe's largest dedicated motoring opinion panel, the AA-Populus Driver Poll, which receives up to 20,000 responses each month. Through this we test member opinion on policy issues like those which are the subject of our proposals.

The following pages detail our Autumn Budget 2017 proposals.

3

CONFIRM THAT NO NEW OR RETROSPECTIVE TAXES WILL BE IMPOSED ON PRIVATE DIESEL CARS

After years of encouraging drivers to purchase diesel cars it would be unfair to penalise drivers who bought those cars in good faith.

Drivers contribute £44.77 billion to national and local governments in respect of Vehicle Excise Duty (VED), fuel duty, VAT on fuel duty, Insurance Premium Tax, parking fees and fines. This is equivalent to £1,183 per driver each year.

For many years, government has used tax benefits to encourage drivers to purchase diesel cars.

But for a number of reasons diesels have turned out not to be as clean as we were all lead to believe and this combined with the resulting concerns regarding urban air quality have led to what the media has described as the 'demonisation' of diesel. Extra parking charges in some areas are already hitting those drivers who bought diesels in good faith.

The Spring Budget 2017 advised that steps to tackle air quality would be paid for with tax changes to diesel vehicles but there has been no consultation on what this might mean in practice.

It would certainly be counter-intuitive to penalise drivers for choosing the latest Euro 6 diesels, and measures which did so could be counter- productive by encouraging drivers to hold on to older, more polluting vehicles for longer.

No government has introduced a retrospective tax hike on drivers who own older, more polluting vehicles and such a move would only penalise those who have already followed government advice to buy diesel.

In 2014, three out of 10 drivers said that their next car purchase would be a diesel powered vehicle. That has reduced by half, with only 16% of drivers in 2017 indicating that their next vehicle purchase would be diesel. This shows that the habits of consumers are already changing and that new or additional tax penalties are unnecessary if the objective is to reduce demand for new diesel cars.

More than half of drivers (53%) say that they oppose more tax being imposed on diesel cars, irrespective of their age (AA-Populus Driver Poll of 18,633 AA members).

And two fifths (43%) of drivers say that taxation for both petrol and diesel should remain unchanged (AA-Populus Driver poll of 19,308 AA members).

We call on the Chancellor to confirm that no new or retrospective taxes will be imposed on private diesel cars. These drivers bought their family vehicles with best intentions and increased taxation should be seen as a last resort in encouraging cleaner, greener driving.

A scrappage or retrofit programme will help replace or upgrade older, more polluting diesels, but adding to the tax burden for diesel cars already on the road will change nothing.

Taxing new diesels could be counter-productive and is counter-intuitive. Drivers don't need tax increases to persuade them away from diesel.

4