The Society of Motor Manufacturers and Traders supports the substantial, but temporary, economic stimulus package announced in today's pre-budget report.
It provides positive incentives for consumers to begin spending, but will need to be accompanied by a more active approach to lending by banks and financial institutions.
Commenting on the report, Paul Everitt, SMMT chief executive said, "The chancellor has made a positive first step to help restore consumer confidence and kick-start responsible spending. We now need to see action to remove the constraints on credit and finance so consumers and businesses can take advantage of the changes announced today."
"The 2.5pc cut in VAT combined with the recent cuts in interest rates will encourage consumer spending, impacting on both the new and used vehicle markets. Any move to boost responsible spending is welcome but specific action to improve the affordability and accessibility of credit is needed if the vehicle market is really going to benefit".
"Now is not the time to be increasing motoring taxes so the scrapping of penal increases to VED is welcome. We are disappointed the chancellor hasn't taken the opportunity to reverse his plans for a first year rate of VED and would urge government to reconsider its approach to vehicle taxation policy, aligning it to EU CO2 legislation and providing a more consistent and long-term framework," said SMMT chief executive, Paul Everitt.
SMMT reiterated its call for government to implement a package of measures to bridge short-term cash flow problems created by the banking crisis.
"The motor industry faces a set of unprecedented market conditions. The dramatic fall in demand for new vehicles around the world, combined with the limited availability of funding and liquidity now puts at risk valuable industrial capability. Urgent action is required to boost demand for new vehicles and ease pressure on UK automotive suppliers," said Everitt.
Senior executives representing the UK automotive sector from component manufacturers, through vehicle producers and the retail network will meet the secretary of state for business, Lord Mandelson, on Thursday 27 November.
The automotive sector is calling for support measures to include:
• Allowing manufacturers' finance companies access to the funding available to banks through the special liquidity arrangements. This would allow them to support customers and their franchise networks.
• Scrapping plans for increased VED and new first year rate. This would provide a strong signal to buyers and help to improve residual values.
• Increased capital allowances for fleet buyers, particularly for buyers of commercial vehicles, to stimulate immediate demand.
• Shelve plans for reform of business car capital allowances, as overall impact and timing is unhelpful.
• Remove expensive car restrictions under capital allowances to help demand for UK higher end manufacturers. And, manufacturing support to include:
• UK support for the European Investment Bank's (EIB) proposed €40bn automotive industry loan package so UK companies throughout the supply chain can support their operations and continue to invest during the economic downturn.
• National arrangements to allow manufacturers and suppliers access to loan facilities, including potential government guarantees, to maintain liquidity and investment.
• Help to speed up the allocation of existing funding to support training, R&D projects and energy efficiency measures. This would help upskill employees, accelerate innovation and provide an immediate stimulus for green collar jobs.
Business and consumers should benefit from some of the measures announced by the Chancellor in his Pre-Budget Report, but his apparent generosity in some areas is offset by increases in others, making it less attractive than it may appear, according to the Retail Motor Industry Federation.
Commenting on general measures included in the report, RMIF Director Sue Robinson said, "The reduction in VAT means that car prices will fall, and could encourage consumers to return to showrooms. The VAT drop will also have an impact on the prices of thousands of other consumer goods and services, leaving cash-strapped households with more money to spend. This will help to restore consumer confidence, which is key to the revival of the overall economy.
Commenting on general measures included in the report, Ray Holloway, Director of the RMI Petrol Retailers Association said, "The Chancellor's good intentions are shown to be rather thin through his plan to increase fuel duty to make up for the loss in VAT income from motor fuels.
"Some of the benefits motorists gained as fuel prices dropped following 2008's record high fuel prices will now be lost. Motorists will have less money to spend elsewhere in the economy. The move will also have a negative impact on the UK's hard-pressed fuel retailers, who also benefit when fuel prices are lower."
Freight Transport Association has condemned the Chancellor's move to increase fuel duty to offset cuts in VAT.
The FTA has warned that his decision is a cynical and disgraceful targeting of commercial vehicle operators to help fund his other tax give-aways.
James Hookham, FTA's director of policy, said, "For a Chancellor who said he wanted to support British business through these troubled times, Alastair Darling has a cynical disregard for the cashflow problems of many small and medium sized commercial vehicle operators across the country.
"By offsetting the reduction in VAT with an increase in fuel duty, he has added thousands to the transport bills of companies across every sector. Not only does this hurt businesses directly, it also hurts the consumer, who will end up paying more to cover transport costs of items such as food, clothing and white goods. Christmas suddenly got even more expensive."
The Chancellor's Statement held few warm words for the logistics industry, but the ‘fuel duty snatch-back' shows that the devil is in the detail. The Chancellor confirmed a further increase in fuel duty of 1.84 pence per litre in April 2009 and remained silent on the planned reintroduction of the fuel duty escalator from April 2010. This led FTA to issue another warning to its members: beware of bear traps which could be in store for business.
James Hookham continued, "As far as the logistics sector is concerned, the Chancellor is giving with one hand and taking away with the other. If he is determined to continue to use motorists as a cash cow, then businesses in the road haulage sector will suffer, possibly terminally. He has heard the arguments for the introduction of different fuel duty rates for car drivers and commercial vehicles: now he needs to act."
The Road Haulage Association is both bitterly disappointed and angry that Chancellor of the Exchequer Alastair Darling has announced an increase in fuel duty to compensate for the VAT reduction by 2.5 per cent.
"This is an outrageous announcement", said RHA Chief Executive Roger King. "We have been putting forward the case of unfair competition from foreign hauliers for many years.
"Indeed the Transport Select Committee itself made a case for measures to level the playing field between UK hauliers and their continental counterparts. Therefore this announcement represents not only a smack in the teeth for UK hauliers, but challenges the conclusion of Westminster's own Select Committee.
"The Chancellor claims that the increase in duty is offset by a reduction in VAT. But he does not seem to appreciate that while this may be true for motorists, it is NOT true for hauliers because they can reclaim VAT in full. So this represents a real increase in the industry's operational costs and is not what we expected or what UK plc deserved."
RHA National Chairman Andy Boyle added: "I am absolutely livid at this announcement. If things were not bad enough, it now seems that we have a Chancellor who does not understand his own tax system."
Edmund King, AA president said, "The Chancellor is giving with one hand and taking away with the other.
"By increasing fuel duty whilst reducing VAT shows that the Chancellor is playing roulette with global fuel prices and could lose his gamble. It is a very big gamble as there are 32 million motorists out there and most of them have a vote. If the global price of oil increases this hike may come back to haunt the government. It also means that when VAT reverts to 17.5pc the motorist will be hit at the pumps once again."
The AA welcomed plans to increase capacity on the motorway network as congestion costs billions of pounds to business and individuals each year.
Plans to increase VED by a maximum of £5 in each band was welcomed by the AA. Edmund King, added, "We believe Government plans to delay the massive hikes in VED is welcome. Gordon's short-term tonic for motorists, whilst welcome, is not enough to bring the fizz back to the used and new car market."
Chancellor, Alistair Darling's announcement today in the Pre-Budget Report that proposed road tax increases for cars registered between 2001 and 2006 are to be adjusted to reduce pressures on motorists during the current economic downturn, has been welcomed by TheGreenCarWebsite.co.uk.
"While we support the idea that car taxation should reflect vehicle emissions, the postponement of the VED increases will give temporary but much needed relief to those car-dependant, lower income families. It is unlikely that such motorists would see an increase in their road tax rate as being fair at a time when we are all feeling the pinch.
"In the end, all cars come at a cost to the environment. Keeping your older car well-maintained through regular servicing and keeping tyres inflated to the correct pressure for example as well as driving in an economical style* can help to reduce its environmental impact", says Faye Sunderland, editor for TheGreenCarWebsite.co.uk.
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