Summer Budget 2015 – What it means for transport

Chancellor of the Exchequer, George Osborne’s Summer Budget 2015 is one that ‘puts security first’. It comes at a time of growth for the economy, which rose 3% in 2014. A 2.4% increase was forecast in 2015 (0.1% lower than predicted in March). Salient points in the document included a cut in the deficit at the same pace as during the last Parliament. It was also announced that borrowing is set to fall from £69.5bn this year to £43.1bn, whilst debt as a share of GDP is to fall from 80.3% to 79.1%. A 1% public sector pay rise is to continue for the next four years. A further £37bn of spending cuts are to be made by 2020, including through welfare cuts and a clampdown on tax avoidance.

From a business perspective, corporation tax is to be cut to 19% in 2017 and18% in 2020. From April 2016, a new National Living Wage of £7.20 an hour for the over 25s will be introduced. This will rise to over £9 an hour by 2020. To help facilitate this, National Insurance employment allowance for small firms is to be increased to £3,000 from 2016.

£7.2bn is to be raised from a clampdown on tax avoidance and evasion and permanent non-dom status is to be abolished from April 2017. Dividend tax credit is to be replaced with a new tax-free allowance of £5,000 on dividend income. There will also be a new apprenticeship levy for large employers.

One of the headline points in the budget concerning transport was the announcement of discussions on devolution of services to Sheffield, Liverpool and West Yorkshire. It has been declared that control over fire services, planning and children’s services are to be handed to a consortium of ten councils in Greater Manchester. £30m was announced for the formation of a new body to promote integrated transport, including use of Oyster style cards, in the north of England. Also announced was the creation of ‘Transport for the North’ (TfN), a statutory body with duties to set out transport policies and investment priorities for the north.

Commenting on this, Chairman of KPMG in the North (provider of auditing, taxation and advisory services), Chris Hearld, said, ‘We have always maintained that for the Northern Powerhouse to succeed, all parts of the region need to be brought on board, so it was encouraging to hear that following the lead set by Manchester, devolution deals are in the pipeline for the likes of Leeds, Liverpool and Sheffield. However, it was incredibly disappointing that no further announcements were made regarding investments in our regional transport infrastructure. While the introduction of an Oyster card system across the north is a nice gesture in principal, it will do absolutely nothing to alleviate the lack of capacity and very little to improve the connectivity on our region’s ever-crumbling rail network.’

The Chancellor announced £5m of funding for the Midlands Connect consortium, which is pressing for better transport links to help cement the Midlands as an ‘Engine for Growth’. Chair of the Midlands Connect Partnership Steering Group, Andrew Cleaves, said, ‘Today’s Budget statement is very encouraging and clearly shows that the Government fully recognises that a dynamic and successful Midlands is vital to the UK’s overall economic health. But we now need to power up the “Midlands Engine” which is why we have asked Mr Osborne to back a high level summit to discuss the part Government can play in securing a long term investment strategy.’
There was no rise in fuel duty in the budget, with rates continuing to be frozen. Commenting on this, Chairman of the Petrol Retailers Association, Brian Madderson, said, ‘The PRA has been lobbying government and the Treasury on the subject of fuel duty, so it is good news to hear the Chancellor’s announcement. However, the PRA feels disappointed that the Chancellor has ignored both ours and many other motoring organisations pleas to cut duty by at least 2ppl. This would be a positive move which would boost the economy and improve household expenditure. While oil prices are expected to stay low, the oil market is notoriously hard to predict so there is always the chance that fuel prices will be considerably higher by the time of the Budget in March 2016 and any increase in duty would therefore have a negative effect on the economy.’

The Freight Transport Association was similarly supportive of the fuel duty freeze. FTA’s Deputy Chief Executive, James Hookham, said, ‘The Chancellor has listened to the voice of industry by keeping fuel duty at current levels, which is to be welcomed. However, the Government has emphasised that its primary objective is to protect the UK economy. We believe that reducing fuel duty would make a huge contribution to this objective and we will continue to campaign with FairFuelUK for a 3p per litre cut in order to stimulate economic growth.’

Money raised in Vehicle Excise Duty in England will go into a new Roads Fund, which is to pay for the sustained investment of roads. Head of transport at KPMG UK, James Stamp, said, ‘This provides some clarity about where funding for the ambitious road projects will be found. However, we note that while road tax raises around £6bn per year, this is dwarfed by income collected from fuel duty which is around £27bn. We believe that more of this income should be reinvested in roads and transport infrastructure in line with the Chancellor’s statement that money raised from drivers should be spent on the roads they drive on.’
A major reform to vehicle excise duties was announced, which is planned to pay for a new road building and maintenance fund in England.

It was also announced that category 2 tolls for small goods vehicles and small buses would be abolished once Severn River Crossings are in public ownership.

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