Amongst a rise in national insurance, petrol, and energy prices; it has recently been announced that several driving laws are also due to come into force across the UK that will see a rise to Vehicle Excise Duty (VED), the restricted use of red diesel and rebated biofuels and the implementation of further clean air zones (CAZ).
Although these rises in tax are created with good intentions for the environment, the wider impacts of further tax increases will be of huge detriment to UK citizens who are already facing a stark rise in the cost of living, and businesses dependant on the driving sector for functionality.
Rise to Vehicle Excise Duty (VED)
As part of the Autumn budget, Rishi Sunak announced a rise to VED from April 2022 in line with the inflation of Retail Prices Index (RPI).
VED is an annual tax to road vehicles (cars, vans, lorries, and motorcycles) and is issued by the Driver and Vehicle Licensing Agency (DVLA).
The new rates are expected to have major impacts on individuals or businesses owning a car (those owning new cars or cars producing excessive amounts of CO2), a van, a motorcycle, or those using a motorcycle trade licence.
Despite the uplift in rates being introduced to aid financial recovery from the COVID-19 pandemic; the consequences of yet another tax rise will undeniably have an impact on the wider supply chain and the rise in VED will certainly be of detriment to the already struggling driving sector.
As the average road tax increases, employers are in danger of being left with yet another financial burden when it comes down to managing their fleet. With many employers already facing financial strain following the pandemic; the added rise in taxes makes it challenging for businesses to inflate driver wages in line with the rising cost of living. Potentially leading to more withdrawals from the profession, this could add to the already profound driver shortage and result in further repercussions for the already weakened supply chain.
Changes will continue to favour those businesses and individuals who use less polluting vehicles; placing considerable amounts of pressure on those outside of these groups to comply. With inflation currently hitting its highest since 1992, these changes will affect the affordability of goods and services for individuals across the UK. As low-income households have less disposable income and flexibility when it comes down to managing monthly payments, further tax increases could leave a portion of the UK unable to run their vehicles.
Further Clean Air Zones (CAZ)
May 2022 saw the launch of clean air zones (CAZ) in Greater Manchester for drivers of buses, coaches, taxis, HGVs, PHVs and LGVs.
Further CAZ could be rolled out for Bradford and Scotland in June 2022.
A CAZ is an area of a city which requires a fee to pass through if a vehicle does not comply with the emission standard set by the government. Consistent expansion of these areas aligns with the governments long-term goal of improving the UK’s air quality by targeting high-pollution areas and discouraging the use of older, higher polluting vehicles.
To comply with the clean air standards and to avoid being charged in a CAZ, a vehicle must meet the minimum emission standard:
- Buses, coaches and heavy goods vehicles must be Euro VI standard
- Vans, minibuses, taxis, private hire vehicles and cars must be Euro 6 (diesel) and Euro 4 (petrol) standard
- Motorcycles must be Euro 3 standard
Although a positive step for the environment; the effects on both businesses and consumers are lengthy. For businesses supplying into these newly adapted areas, fleets that fail to meet the minimum emission standards will need to either be upgraded in line with CAZ standards, or will succumb to significant, regular charges - a costly expense either way.
Consideration of the impact of these changes is key as the process of upgrading large fleets is lengthy and choosing this option has the capacity to cause huge disruption to operations - ultimately having a knock-on effect to the entire supply chain. Alternatively, with up to £100 daily charge per lorry, businesses should ensure they are prepared for the changes by the required deadlines, or else face further significant financial consequences.
In line with the rise in VED, consumers living in CAZ areas may no longer be able to run their current vehicle without facing hefty charges.
With the only alternative option to invest in a newer, less polluting vehicle - these changes will place further financial pressure on low-income households already suffering from the effects of the pandemic.
Even though the implementation of further CAZ’s is designed to benefit the health of individuals living and working in these areas; it is interesting to consider how the impact of these financial strains will affect the wellbeing of said people.
On a more positive note, businesses are provided with National Insurance savings when transitioning to a green fleet. This allows increased access to funding to pay towards charging points for electric vehicles on-site and can help enhance a business’s impression towards their clients by showing a clear commitment towards both their people, and the environment.
The upcoming driving laws form a vital part of how the government plan to work towards aiding financial recovery from the pandemic and are an essential steppingstone towards the long-term goal of improving the UK’s air quality. But with the government failing to take into consideration lower income households that fail to meet the minimum standards, there is concern that the expansion of CAZ will make living in these areas unachievable for many.
Areas that are unaffordable are a slave to recruitment and retention crises and the UK is already in the midst of major supply chain issues. Labour shortages are at an all-time high, national insurance and interest rates are increasing by the day and unemployment rates remain worryingly low.
Whilst recruiters are met with the ever-growing challenges of the current economy, rises in VED make owning a vehicle more difficult to afford and may potentially further reduce the number of flexible workers at their disposal. The rising cost of commuting makes alternative transport methods difficult and with the pressures of CAZ expansions, the cost of travelling to and from the workplace could soon become unsustainable.
Although the benefits of these changes towards the government are clear, we can only wonder what the worryingly effects will be on the recruitment industry already struggling to bounce back from the pandemic.
Read more around the new driving laws affecting motorists in 2022 here.
To view more around CAZ standards, you can visit the GOV.UK website.