Budget 2011: What it means for the motorist

Today’s budget has been announced by Chancellor of the Exchequer George Osborne and the big news was the surprise cut in fuel duty by 1p from 6pm this evening.

Other measures were also taken to ease the burden on motorists, including a year-long freeze on proposed 4p per litre rises which were due to come into force next month.

Then there was the introduction of the Fair Fuel Stabiliser to replace the fuel price escalator, which has been postponed for four years in the new budget.

But what does it mean to the motorist?

The headline news is from 6pm today, fuel will be 1p per litre cheaper in fuel pumps. With the price of petrol and diesel breaching 130p and 140p per litre respectively, this is a welcome move from the coalition government.

However, it remains to be seen if the reduction in fuel duty is passed on to drivers at the pumps.

Fair Fuel Stabiliser

The Fair Fuel Stabiliser means the government will scrap the fuel duty escalator. The escalator was used to increase fuel duty above the rate of inflation to help improve congestion and pollution on UK roads.

What this means for the motorists is inflation-only rises in fuel duty, instead of rises above and beyond the rate of inflation.

The government will pay for this by increasing levys on oil and gas producers from 20 per cent to 32 per cent.

This can be lowered again if the price of oil drops in future. What it should mean is fuel prices at the pumps will be more balanced and should start dropping in future.

However, it could also mean the extra levy on oil could be passed onto the consumer, meaning no change in prices at the actual pumps.

Overall, the budget was better than expected for motorists in the UK. The best case scenario would see fuel prices across the UK begin to fall in the next 12 months and the cost of owning a car fall with it.

Company car tax and VED

Company car tax will increase for all cars with CO2 emissions over 95g/km from 2013, Osborne has announced.

This will mean one per cent higher rates for all but the lowest emitting cars.

VED has increased very slightly for cars with higher CO2 rates. For cars with CO2 emissions under 120g/km, the rates have remained the same (and are free for cars with CO2 emissions under 100g/km).

However, cars in the 120-130g/km tax band can expect to pay £5, with incremental increases for subsequent bands up to a £50 increase for 239g/km+ cars.

Potholes

As announced earlier this year, the government will offer an extra £100m towards filling in potholes and other road maintenance across the UK.

The AA has welcomed the investment but warned ‘billions still need to be spent to bring all roads up to scratch’.

For UK drivers, the £100m will go some way to solving the increasing problems of potholes after the icy weather caused many roads across the country to break up and form potholes.

This can only be good news for steering alignment and suspensions across the UK.