The UK Government has introduced a tax hike on new diesel cars in its Autumn Budget, as part of plans to reduce air pollution.
Chancellor Philip Hammond confirmed that diesel cars sold from April 1 2018 onwards will be pushed up a tax band unless they conform to next-generation Real Driving Emissions step 2 standards, which won't become a legal requirement until 2020. The company car tax rate for new diesel cars that don't comply to the RDE type 2 rules will be increased from 3% to 4%. Hammond had previously pledged to give at least three years of notice before changing company car tax rates.
The tax band increases and company car rate changes won't apply to diesel vehicles currently on the road. Those cars will remain in their current tax bands.
The new RDE tests measure the pollution levels of car on the road, as opposed to in a laboratory as in the old NEDC testing system, and run alongside the lab-based Worldwide Harmonised Light Vehicle Test Procedue (WLTP). The on-road RDE tests will be used to validate the results of the WLTP exams, with two steps set for how close the results of the two tests must be aligned on emissions output.
The new emissions tests are broader in scope than the older NEDC tests, and include a big focus on NOx emissions. The second step, which the government is using as the basis for its tax hike, gives cars a 'conformity factor' of 50%. To ensure cars meet this conformity level, they will have to ensure cars fall well below the currently allowed NOx limits.
The process is more stringent than the old lab-based NEDC (New European Driving Cycle) system. Current diesel cars are only required by European law to conform to RDE step 1 standards, meaning the Budget's requirement for step 2 could affect even the very latest models. This essentially means the government will begin penalising models that don't conform to a 2020 regulation from April 2018.
The UK's Society of Motor Manufacturers and Traders boss Mike Hawes believes this is unfair, stating: "It's unrealistic to think that we can fast-track the introduction of the next generation of clean diesel technology which takes years to develop, in just four months. This budget will also do nothing to remove the oldest, most polluting vehicles from our roads in the coming years.”
The new diesel tax hike, which Hammond said applies exclusively to cars, leaving van and lorry drivers unaffected, forms part of the government’s plans to fight Britain’s growing air quality problem, of which it labels diesel pollution a major contributor.
But Hawes believes that targeting the newest diesels is the wrong method to take. He said: "We know the government wanted to raise revenue to pay for the air quality plan. We recognise that they didn’t want to penalise existing diesel-car owners who bought their cars in good faith. But we want to encourage the latest technology”, referring to new diesel cars on the market. He added that there was “nothing in the budget about getting older vehicles off the road,” which are the worst offenders in the quest for better air quality".
Hammond said that the money raised from the raised diesel taxes, which the government claims will amount to £70 million in 2018 and £35m the year after, would be used to fund air quality improving projects.
Referring to the changes to diesel company car tax, the AA's director of fleet and SMEs (small and medium sized enterprises), Stuart Thomas, said that the new Budget adjustments may be met with confusion.
“Fleet managers are positively investigating alternative fuel sources, but our research shows they don’t feel they have enough information to take a strategic step forward," he said. "A number of industry roadmaps exist which plot the UK’s journey towards a low-carbon future but which are heavily jargoned and not easily understood by the SME sector."
In his Budget response, Labour Party Jeremy Corbyn said the Autumn Budget adjustments will hurt "ordinary people". He added: "The reality test of this budget will be how it affects ordinary people’s lives."
Hammond also confirmed that fuel duty will remain frozen, ensuring this is the longest period without change to the duty seen in Britain for 40 years. The government claims that the frozen rate will save motorists on average £160 in 2018.
Alongside his clampdown on diesel, Hammond announced a £400 million investment into the UK’s electric car charging infrastructure in a bid to attract motorists to electrified vehicles. He confirmed £100m has been allocated to continue plug-in car grants to 2020.
Hammond said that people who charge their electrified vehicles at work will not face a benefit in kind charge.
"Our future vehicles will be driverless, but they’ll be electric first. That’s a change that needs to come as soon as possible,” he said.
The investment was welcomed by Gareth Dunsmore, who heads up Nissan Europe's electric vehicle division. The Japanese firm produces the world's best-selling electric car, the Leaf, and recently announced its own investment programme in charging infrastructure.
Dunsmore said: "A £400 million investment to boost the deployment of EV charge points is a welcome next step in further developing UK electric car infrastructure, as increasing numbers of consumers look to embrace electric vehicles."
Electric taxis have also been granted the same supplementary VED charge exemption as diesel taxis. Up until now, the higher price of electric cabs, like the new LEVC TX black cab, had placed them in the luxury car tax bracket.
The UK Government has also announced £500 million worth of investment into the wider tech industry and a new regulator's pioneer fund to help fast track regulation for new technology. This has freed up £40m for research and development into electric and autonomous cars.
The Budget report notes that the Government wants "to see fully self-driving cars, without a human operator, on UK roads by 2021." The report says this will be achieved by making "world-leading" changes to the regulatory framework, which will include "setting out how driverless cars can be tested without a human safety operator."
The National Infrastructure Commission will also launch a new prize to determine how future road-building projects should adapt to self-driving cars.
Uncertainty surrounding the impending budget has already had an impact on diesel registrations in Britain, with diesel sales dropping by 29.9% in October. Experts claim that motorists have held off on buying new models until the budget’s true impact is revealed. There are currently around 37 million diesel vehicles on Britain's roads.
The SMMT's Mike Hawes predicts that some the introduction of the new diesel taxation in April 2018 means that some people, particularly company car buyers, will pull forward purchases of diesels to help avoid new car tax and company car tax costs. But he added that most consumers will conclude that with diesel being taxed more, they will turn to petrol instead, continuing the downward trajectory of diesel sales seen in recent months.
Despite growing pressure on diesel, particularly following the Volkswagen Dieselgate scandal, independent research carried out by Autocar sister title What Car? has shown that while most petrol vehicles do produce less NOx and particulates than diesel equivalents, some of the market’s newest diesels can actually be cleaner than their petrol alternatives.
What Car? tests showed that the new BMW 520d emits just 0.035g of NOx per kilometre, identical to the amount produced by the Volkswagen Passat GTE, a hybrid-petrol model. The tests showed that CO2 output for the 520d is 0.038g/km, while the Passat emits 0.174g/km.
Experts therefore associate the UK’s growing automotive air pollution problem with older diesel vehicles, rather than the latest Euro 6 models. Older diesels can lack the particulate filters of new cars and thus produce significantly higher levels of NOx and particulates.
While the UK government has focused its efforts for air pollution on diesel vehicles, some local authorities have chosen to tackle high-polluting vehicles of any fuel type. London last month introduced the T-charge, which charges drivers of higher-polluting vehicles £10 to pass through certain zones, while Oxford City Council wants to go a step further with plans to ban petrol and diesel cars from its inner city streets from 2020.
Other transport investment
The Budget also includes a further £45million for 2017/18 that will be spent on repairing around 900,000 potholes across England.
A £1.7billion fund has been established to support intra-city transport, and will include projects designed to reduce congestion.
To boost the economy of the Oxford-Cambridge corridor, the government has approved key elements of an Expressway between the two cities. Work is due to begin shortly, with a completion date of 2030. To improve access to the A391 near St Austell in Cornwall, £79million will be spent on a new A30 link road, which it is hoped will support housing development in the area.
To reduce congestion in Great Yarmouth in Norfolk, the government is contributing £98million towards a a new bridge.