How the 2016 Autumn Statement affects drivers

  • Fuel duty rate frozen for seventh year running
  • More than £1bn road investment confirmed
  • Car insurance tax up, fraudulent whiplash claims tackled 

Chancellor Philip Hammond has set out the government’s latest spending priorities in today's autumn statement – the first major outline of planned expenditure since the UK’s vote to leave the EU in June 2016. 

The Chancellor announced that £23bn will be made available to infrastructure and innovation development over the next five years, with £2bn by 2021 put aside for research and development.
He also stated that an additional £220m will go towards easing traffic pinch points on major roads, while £390m will be put into developing low emission vehicles and connected autonomous vehicles.

The Chancellor announced that £23 billion will be made available for infrastructure and innovation development over the next five years, with £2bn put aside by 2021 for research and development.

He also stated that an additional £220 million will go towards easing traffic pinch points on major roads, while £390m will be put into developing low-emission vehicles and connected autonomous vehicles.

Around £1.1bn has been pledged for English roads and railways networks, to address congestion, bottlenecks and fill in potholes.

Meanwhile, fuel duty has been frozen for the seventh year in a row, limiting any rises in prices for petrol or diesel at the pumps.

Car insurance news is good and bad; premiums could drop by around £40 per year due to more stringent rules over whiplash compensation, though insurance premium tax will rise from 10% to 12% in June 2017 – an increase of around £15 on a typical policy.

Changes to salary sacrifice car schemes have also been announced from April 2017, with an end to tax savings for employees who take advantage of these set-ups. However, this will not apply to ultra-low emission vehicles – including electric models and plug-in hybrid cars.

Industry responses to the Chancellor's speech:

Following today's announcements Rupert Pontin, director of valuations at car valuation company Glass's, has highlighted that changes to salary sacrifice rules, new company car tax rates for 2020-21 and greater allowances to install electric vehicle chargers demonstrate "an underlying push towards ULEV [Ultra Low Emission Vehicle] technology".

Pontin continued: "It seems pretty clear that the government envisages us driving around around in largish numbers of electric and advanced hybrid vehicles within five years which, in our view, is a good match for the rate of development of EV [electric vehicle] technology. This will probably help to power new car sales."

Meanwhile, Mike Hawes, chief executive of the Society of Motor Manufacturers & Traders welcomes new commitment to improving infrastructure and for research and development, stating: “One of the main areas in which UK Automotive is playing a leading role is the development and introduction of low emission and connected and autonomous vehicles. The Chancellor’s announcement of £390 million will help promote our competitive advantage in these fields.

"We welcome the investment to enhance the charging network for electric vehicles, as well as further support to boost uptake of low emission buses and taxis." 

Car finance, the way most drivers fund their cars, could see changes too, with fewer drivers able to take advantage of the best deals potentially. According to Paul Burgess, CEO of Startline Motor Finance: “People generally are likely to have less money in their pockets and perhaps even face greater uncertainty over their future employment prospects.

"Over a period of time, this could potentially have an impact on the shape of the market. Fewer borrowers are likely to meet the requirements of prime lenders [companies that are likely to offer the most appealing deals] and, as we have long been predicting, the market could become more sophisticated, with a broader spread of motor finance providers offering a clearly signposted, broader spread of risk appetites."

Budget, March 2016: at a glance

The autumn statement follows the main Budget in March. Here's what the government pledged then:

  • Fuel duty remains frozen
  • Insurance tax set to rise again
  • Tolls cut and road improvements given green light

There has been a great deal of speculation surrounding this year’s Budget - in particular how the Government plans to recoup some of the losses in public spending following a period of uncertainty in the global economy.

After a five-year freeze, it was thought that fuel duty would pay the price and rise by as much as one pence per litre (ppl) to help plug the deficit. The good news is that the Chancellor of the Exchequer has confirmed today in the annual Budget that fuel duty will remain frozen for the sixth year in a row, despite a rise in inflation.

According to George Osborne, this will bring savings of around £75 a year for the average driver and is a “tax boost that keeps Britain on the move”.

Although welcomed by many in the industry, the Freight Transport Association (FTA) believes Osborne missed an opportunity to boost the economy by introducing a reduction in fuel duty.

James Hookham, FTA managing director of policy and communications' said: “A further freeze of duties is welcome but the Chancellor missed a chance to give a boost to the stuttering economy by reducing the tax on an essential business input.”

There was more good news for motorists including:

  • From 2018 tolls will be halved on the Severn crossings so it’ll be cheaper to travel to Wales
  • The M62 is set to be widened to four lanes between Leeds and Manchester
  • A new tunnel under the Pennines from Sheffield to Manchester has been given the green light

It's not all positive though: insurance tax will see a rise of 0.5 percent in a bid to raise funds to tackle flooding costs. This is the amount insurers are taxed, which they then pass onto consumers. In July 2015, Osbourne announced an increase in the tax - from six per cent to 9.5 per cent, which took effect in January. This further hike will mean 10 percent of car insurance costs will go straight to the taxman and we should all be prepared to see premiums rise as a result.

Other big news includes the increase of the tax-free personal allowance from £10,600 to £11,500 in 2017, the introduction of a new sugar levy to penalise sugary drinks and a reassessment of the UK's projected growth figures to two percent this year.

“Today I report on an economy which is set to grow faster than any economy in the world," said the chancellor. "Financial markets are turbulent and the outlook for the global economy is weak. Britain is well prepared to handle it if we act now. In this Budget we choose to put stability first, with long-term solutions and sound public finances to deliver security.”