Matters of moment, May 1991

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Post Budget Blues

Post-Budget Blues for many, but not necessarily pale blue, and hopefully not red. . . . From the car-owner’s viewpoint it might have been worse. The so-called ‘Road Fund’ Tax (but it was raided many years back) is unchanged and the much appreciated reduction for older cars presumably remains intact, at £60 a year. However, as most veteran to vintage vehicles cover only about a tenth of the mileage of moderns, £10 would be a more realistic assessment. As for the increases in petrol and diesel-oil duties, with mild encouragement for ‘green’ fuels, they are what motorists have come to expect!

Successive Governments have invariably been after the motorists’ money. They have extracted it in various ways. The RAC hp-tax and 3d on a gallon of petrol was imposed from 1909, and a petrol levy was reintroduced in 1928 at 4d (1.7p) a gallon, after it had been abolished for 12 years. The original hp-tax produced the design-crippling ‘small-bore’ incentive and varied from £3 up to 12hp, to £42 per annum for cars of over 60hp. It persisted for eleven years, until replaced by an overall £1 per hp-tax in 1920 (minimum £6), model-T Ford users then having to find £23 instead of 6gns a year. The levy was reduced to 15/- (75p) per hp in Chamberlain’s 1934 Budget (blowing away the 1930’s blues!) but increased to 25/- (£1.25p) by 1940, Chancellor Simon explaining that this was in lieu of an Income Tax increase, car owners being seen as very largely corresponding to the Income Tax-paying classes!

The taxation basis was altered in 1947 to a charge on engine capacity, in increments of 100cc and the present flat-rate tax came in in 1947, then at £10, but with purchase-tax on cars costing over £1000 raised to 66-2/3 — the motorist always pays! In addition, petrol tax was 9d a gallon.

We must be grateful that, at a time of recession, the Lamont Budget held the flat-rate tax at £100. However, car tax does not end with buying a licence disc. There is company car tax, for instance, which those not entitled to free motors regard as far too low and those who are ‘lucky’ enough to qualify for such cars think of as too high. Let’s be realistic. For highly-paid executives a fine big car on the company may be an acceptable ‘perk’. But what of those on comparatively low salaries, who may not particularly want a company car? Commercial travellers out all the week behind a steering-wheel may have had almost enough and use their cars very sparingly at weekends. Yet they are taxed just the same. If they and other workers to whom a car is part of the job, can convince the Tax Gentlemen that they exceed 18,000 business miles a year, there is a tax-reduction; but this does not help those whose work involves toiling in offices and factories as well as being out on the “enjoyable open road”, as against those whose work justifiably involves almost 100% driving about. It seems, too, that the Tax-man places undue faith in the accuracy of odometers and the reading thereof…

What of the employee who may not want a company car, or not the one provided, but who is unable to refuse it and has to pay a thumping great slice of tax on it, even though his pay-scale commences at £8500? It is arguable that the average company car still represents a “bargain”, even at the increased rate of tax now put on it by the Major Government. But Lamont could have made the point more convincing by raising the surprisingly low, and unacceptable, salary threshold. The fact is that the British Motor Industry is in a pitiful state and that rubs off on the components and accessories makers — ask Lucas’s employees! This latest increase in company car tax will have a very adverse effect on fleet sales, on which the Motor Trade relies heavily, and this will govern the price we pay for our personally-owned cars, spares, and the rest of it. . . .

Cars themselves have kept reasonably in step with inflation. According to The Economist scale the £100 Morris Minor 2-seater of 1931 or the £100 Ford 8 Tudor saloon of 1935 would cost today around £2700. Compare with the present prices of a Fiat 126 (£3225) or a Mini City (£5150). But unless mass sales to fleet users can be regained, the Motor Industry has a slim chance of making a quick return to prosperity, never mind the effect of the Major/ Lamont Poll Tax which will continue to be in the news at least until after the next General Election. — WB