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Budget 2016: What it means for motorists

Chancellor George Osborne has delivered his budget, complete with a sugar tax and an increased ISA limit. But what does it mean for motorists? Here’s the lowdown.

It’s that time of year when the chancellor clutches a red suitcase (it’s a tradition thing) and gives an update on the government’s economic plans.

This year Osborne announced a sugar tax, an ISA limit increase to £20,000 and a reduction of Capital Gains Tax. Jeremy Corbyn wore a suit (although this is hotly debated). Oh, and motorists were given some good and bad news – read on to find out what.

Fuel duty on the up?

Nope, not today anyway. Osborne has frozen the fuel duty rise for the sixth year in a row, meaning motorists should save £75 per year for an average driver and £270 for a business van. The former is about a full tank of fuel for a medium-sized car, so hardly a huge saving but it helps.

That’s good, right?

Yes and no. Fuel is at its cheapest in a long time (remember it was an eye-watering £1.40 per litre not so long ago?), which means the cost of motoring is cheaper than usual.

But the government could have done more, given that petrol, diesel and biodiesel is currently charged at 57.65 pence per litre. After all, the RAC foundation estimates fuel duty will bring in more than £27 billion next year – hardly small change.

Osborne said: “We froze fuel duty throughout the last Parliament – a tax cut worth nearly £7 billion a year. In the last twelve months, petrol prices have plummeted. That is why we pencilled in an inflation rise.

“But I know that fuel costs still make up a significant part of household budgets and weigh heavily on small firms. Families paid the cost when oil prices rocketed; they shouldn’t be penalised when oil prices fall.”

Any bad news?

Insurance tax – officially known as Insurance Premium Tax (IPT) has been increased by 0.5 per cent. The effect of this will be increased insurance premiums, although the biggest increase will have already been felt after the government hiked the standard rate from 6.5 to 9.5 per cent in November 2015. 

Consumer Intelligence found that car insurance premiums increased by an average of 13 per cent in 2015. No wonder, then, it was dubbed a “stealth tax” by critics. A half per cent rise should cause a much smaller increase, but it’s an increase all the same. The AA reckons around £50.

What else was announced in the 2016 budget?

Crossing from England into Wales will be cheaper, as the chancellor said the toll rate will be halved in 2018. Based on the current price, that would make it £3.30 for a car. The government will also review free-flow tolling to potentially speed things up. 

A tunnel road between Manchester and Sheffield has also been given the green light, as have plans to make the M62 a four-lane motorway. An extra £161 million has been invested to accelerate the upgrade.

A further £75 million has been pledged to improve road links across the north, including upgrades to the A66 and A69.

£130 million is being spent to repair roads and bridges damaged by the UK’s recent storms, Desmond and Eva.

Expect to see trials begin for comparative fuel price signs in 2016, between Bristol and Exeter on the M5 motorway. Basically, these signs allow you to see the price of fuel for a number of petrol stations on the route so you can decide where best to refuel.

What about bloody potholes?

The chancellor announced it was “setting out” its £50 million Pothole Action Fund, which will be allocated across councils in England in 2016 to 2017. Nearly one million potholes will be filled. No way near enough to solve the problem, then, given the estimation it would cost billions to fix the UK’s ageing road network.

Any driverless car stuff?

Osborne never actually mentioned the UK’s current desire to be a world-leader in autonomous (self-driving) cars, but the transcript mentions conducting driverless trials on the road network by 2017, consulting on autonomous cars, wireless truck testing from London to Dover.

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