UK's emergency Budget 2010: how it affects motorists

Chancellor George Osborne will make the emergency spending cuts on Tuesday 22 June

By Tim Pollard

Motoring Issues

21 June 2010 09:51

The new UK Government's emergency Budget tomorrow is likely to announce a raft of spending cuts and tax rises bound to affect motorists. 

The new Conservative-Liberal coalition government is taking the unusual step of holding an emergency summer Budget to reduce the national deficit, which stood at £156bn in 2009-10. The senior Cabinet members signed off the details of the Budget on Friday, but the details won't be confirmed until Tuesday 22 June 2010.

Here's our preview of what to expect if you're a car owner:

VAT rise
Most pundits agree that the rate of value added tax will rise from today's 17.5%. If raised to 20% – the upper limit expected – it could raise an extra £11 billion a year for Government coffers. Higher VAT will make new and used cars more expensive, and add to everyone's fuel and servicing costs. Buy a £20k car today, and £3500 goes straight to the Treasury; if VAT rises to 20%, you'll pay an extra £500.

Road maintenance
Chancellor George Osborne has already spelled out cuts of £683 million at the Department of Transport, which amounts to nearly 5% of its annual budget. That suggests that some road building and maintenance could be postponed or cancelled. Fuller details could be announced tomorrow.

Fuel duty
Petrol and diesel are already taxed at high levels, and the Conservatives pledged in their manifesto to introduce a fuel duty stabiliser to protect motorists from see-sawing pump prices when the price of oil spikes. An inflationary rise in fuel duty remains a distinct possibility, however.

Vehicle excise duty
The annual tax disc paid for by all UK motorists remains a cash cow for the Government. In the past few years, the emphasis has shifted from cubic capacity to CO2, and it's likely that the most polluting vehicles in Band M could be targeted with further rises. They already pay £950 in their first year, and £435 annually thereafter.

>> Come back to CAR Online on Tuesday for live coverage of the details of the emergency Budget and how it affects motorists

By Tim Pollard