Electric cars and vans escape the Chancellors axe, but little else does….

Today more intrigue and rumour abound about an apparent split within the cabinet between the Chancellor, Alistair Darling and the prime minister, Gordon Brown. Most major news networks are reporting that the PM may have overruled the Treasury department which had wanted to make much deeper cuts and savings, however this has subsequently been strenuously denied by No10. Of course next year is an election year and no incumbent government in their right mind would attempt to make swathing public cuts whilst trying to get re-elected.

Although most of the budget was anticipated, the Chancellor did manage to slip in a few surprises like the additional 0.5% increase in National Insurance and a one off 50% tax on all bankers’ bonuses over £25,000. The general consensus amongst political analysts is that this PBR was more about politics, rather than sound economic policy. Businesses appear to have been the hardest it, aside from the financial institutes, retailers will be hit the most by the resurrection of the 17.5% VAT rate and by the increase in NI employer duties.

The automotive industry received a rather mixed bag from the Treasury in the PBR. Company car tax eligibility has been lowered from vehicles emitting 120g of CO2 to vehicles emitting 99g. Although this will raise an estimated £120m, the re-bracketing of this tax will certainly hurt businesses with older fleets. A large portion of these fleets, especially amongst courier firms and van hire companies, are already ageing. With the discontinuation of the scrappage scheme next year and new EU emission limits, the majority of companies will have to look at purchasing newer vehicles in 2010.

But all is not lost because the government also announced a big tax break on electric cars and vans. Earlier this year the government announced a tax break of £2,000 – £5,000 for private buyers of electric vehicles. The move has been celebrated by some manufacturers as a much needed step towards transforming the automotive sector into a greener, less polluting industry.

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