UK Chancellor delivers budget blow for new diesel vehicles while investing in electric

22 November 2017

UK Chancellor delivers budget blow for new diesel vehicles while investing in electric

22 November 2017

The UK’s Chancellor of the Exchequer, Philip Hammond, has delivered his Budget report, with implications for new diesel vehicles and the country’s electric vehicle (EV) charging infrastructure, in order to improve air quality. 

Earlier in November it was announced that the Chancellor was considering ways of adding tax to diesel vehicles in order to fund the implementation of the country’s Clean Air Strategy. In addition, it was expected that more would be done to aid the uptake of plug-in vehicles by making it easier for drivers and companies to charge them.  

Speaking at the dispatch box, Hammond concluded that the UK needs to be a leader in technologies, including autonomous vehicles. He said: ‘Our future vehicles will be driverless, but they will be electric first. That is a change that needs to come sooner rather than later for our planet. 

‘We will establish a new £400 million (€451 million) charging infrastructure fund, invest £100 million (€112 million) in a plug-in car grant and £40 million (€45 million) in research and development for vehicle charging.’ 

Alongside this, the Chancellor added that those who charge electric vehicles at work will not face any benefit in kind (BIK) charges from 2018. 

The focus then shifted to diesel vehicles. The new diesel market has been declining in the UK throughout 2017, although the used car market has shown demand remains for the technology. In April 2017, new vehicle excise duty (VED) bands were introduced, increasing the tax on diesel vehicles. However, used cars are governed by the bands that applied when they were registered, meaning consumers are still able to take advantage of the cheaper tax based on CO2 emissions. 

While there was speculation that fuel duty may be increased on diesel in order to push drivers towards less polluting vehicles that has not materialised. Instead, new diesel cars registered in the UK will, from April 2018, be moved up one band of VED for the first year. This could add as little as £20 (€22) to the first year of tax, and as much as £500 (€563) depending on the amount of CO2 released under official figures.  

In addition, the existing supplement in company car tax will also rise by 1% on diesel cars, but the new VED rates and supplement will not apply to vans or trucks. These rates will apply, the Chancellor said, until vehicle manufacturers release the next generation of cleaner diesel engines, meeting Euro 7 standards. While there is no official date for these standards, it makes sense that they will be implemented when the current CO2 targets regulated by the European Commission expire and manufacturers are required to work to new rules, in 2021. 

The Chancellor added: ‘This levy will fund a new £220 million (€248 million) clean air fund to provide support for implantation of local air quality plans.’ 

Plans to fund testing of driverless cars on UK roads, without any human intervention, were also confirmed.