The first Labour Budget in 14 years offered mixed blessings for motorists, with a number of unexpected changes that will affect the cost of running a car.
With Prime Minister Sir Keir Starmer previously warning that the October Budget would be ‘painful’, many drivers assumed there would be a significant rise in fuel duty, with some suggesting an increase of 7p per litre of petrol and diesel.
However, announcing the Budget in the commons, Chancellor Rachel Reeves warned that increasing the cost paid on fuels would be unwise during the cost-of-living crisis.
He explained: “I have concluded that in these difficult circumstances, while the cost of living remains high and with the backdrop of global uncertainty, increasing fuel duty next year would be the wrong choice for working people.
“It would mean fuel duty rising by 7p per litre so I have decided today to freeze fuel duty next year and I will maintain the existing 5p cut for another year too. There will be no higher taxes at the petrol pumps next year.”
The Chancellor also opened up on the Government’s plans to improve the UK’s road network by increasing local transport funding by £500 million.
The substantial fee would see the fund rise to a total of £650 million, with the majority going to tackle the number of potholes on the roads, which road damage assessment service Stan the App estimates at 11.5 million.
Whilst the move has been widely welcomed, others have argued it is still not enough to remove potholes from UK streets, with some arguing a total of £16.3 billion is necessary to futureproof the roads.
Labour’s Budget also featured two incentives to encourage more motorists to make the switch away from petrol and diesel cars to electric alternatives, with Rachel Reeves announcing an extension to the current freeze on the Benefit-in-Kind rate for company car drivers.
She added: “I will maintain the incentives for electric vehicles in company car tax from 2028 and increase the differential between fully electric and other vehicles in the first year rates of Vehicle Excise Duty from April 2025.
“These measures will raise around £400 million by the end of the forecast period.”
Whilst electric vehicle owners will still need to pay road tax for the first time from April 2025, Reeves also made reference to different prices compared to petrol and diesel models.
During the announcement, the Chancellor noted that there will be a ‘differential’ in road tax prices for EV and internal combustion engine (ICE) cars in a bid to encourage more sales despite the current exemption ending.
Nevertheless, some electric vehicle experts have voiced concerns that the measure does not go far enough, calling for a cut in VAT for public EV chargers to further lower the cost of running a zero-emission vehicle.
