The chancellor of the exchequer Alistair Darling today cut the UK's VAT rate, which – if passed on by retailers – will bring down the cost of new cars and servicing bills.
But the AA and other motoring organisations have criticised the chancellor’s pre-Budget speech in the House of Commons.
He claimed the Government had taken 'firm and responsible steps' to mitigate the effects of a looming recession in Britain, including an extra £3 billion of public spending brought forward and part of which will be spent on the motorway network.
Industry watchers welcomed the widely tipped reduction of VAT to 15%, but for many motorists the chancellor is giving with one hand and taking away with the other. Fuel duty will jump by 2p per litre from Monday 1 December, with further increase of 1.84 pence a litre from 1 April 2009 and an extra 0.5p from 1 April 2010.
Luke Bosdet at the AA said: ‘He gives with the one hand and takes with the other. We face the prospect in a year of the price of fuel going up by 2%.’
The Government is persisting with its 13 new VED tax tiers – which will hammer drivers of high-polluting cars.
We've brought you announcements live this afternoon to monitor the Government's policy announcements to see what they mean for motorists and the car industry. A quick recap of the news follows:
• 4.24pm. VED reforms will be phased in next year. 'Providing a clearer environmental signal through reform to vehicle excise duty, while ensuring that no driver in any given band will pay more than £5 extra in 2009 or £30 extra in 2010'
• 4.01pm. Chancellor admits fuel duty will rise to pay for tax cuts elsewhere. Expect increase of 2p per litre. 'Following a fall in pump prices of over 20 pence per litre from their summer peaks, the postponed 2p per litre fuel duty increase will go ahead on 1 December 2008'
• 3.55pm. VAT rate will fall from 17.5% to 15% from 1 December 2008 for 13 months – cutting price of new cars and servicing (if passed on by retailers)
• 3.54pm. £3bn of public spending brought forward from 2010-11, some of it for road building
• 3.43pm. UK economic growth will fall in 2009 by between 0.75% and 1.25%. That means recession
• 3.31pm. Alistair Darling starts his speech
>> Click here to check out the Parker's tax calculator to see if you're better or worse off after the Pre-Budget changes
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