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Budget: Chancellor commits to investment in rail, regions, electric vehicles and air quality

Mark Moran
22 November 2017

Chancellor Phillip Hammond made investment in both transport infrastructure and in new vehicle technologies key planks of his second Budget of the year. He also flagged up a desire to reduce the cost of travel as a part of household expenditure.

There will be increased spending on rail links and rolling stock across the UK beyond London, with an emphasis being placed on supporting improvements to connectivity in the regions. In particular, Combined Authorities who have elected mayors have attracted significant funding.

A new railcard will offer discounts to those aged between 26 and 30 that will be introduced from spring 2018. Hammond said the card would give 4.5 million more people a third off their rail fares.

The Budget has signalled support for creating new electric vehicle infrastructure and created a fund for improving air quality. However, the Chancellor also left fuel duty untouched.

Read the Chancellor’s Autumn 2017 Budget speech by clicking here 

Automated vehicle research

There will be more support for the development of automated vehicles. “There is perhaps no technology as symbolic of the revolution gathering pace around us as driverless vehicles,” said Hammond. “I know Jeremy Clarkson doesn’t like them. But there are many other good reasons to pursue this technology. So, today we step up our support for it.” 

To encourage the development of CAVs the UK will set out rules so that self-driving cars can be tested without a safety operator. Hammond announced the creation of a national advisory body for artificial intelligence (AI). The Centre for Data Ethics and Innovation will set standards for the use and ethics of AI and data. This will allow the UK to lead the world in developing practical uses for the technology. A new Geospatial Data Commission will develop a strategy for using the Government’s location data to support economic growth.

Electric vehicle charging

The Chancellor also announced that an extra £100m would go towards helping people buy battery electric cars. The government will also make sure all new homes are built with the right cables for electric car chargepoints.

“Our future vehicles will be driverless, but they’ll be electric first,” he said. "And that’s a change that needs to come as soon as possible. So we’ll establish a new £400m charging infrastructure fund, invest an extra £100m in Plug-In-Car Grant, and £40m in charging R&D. And I can confirm today that we will clarify the law so that people who charge their electric vehicles at work will not face a benefit-in-kind charge from next year."

Air quality

With air quality a sensitive issue, the Chancellor announced plans to finance a new £220m clean air fund from an increased tax on diesel cars. A temporary rise in Company Car Tax and Vehicle Excise Duty on new diesel cars will finance the Clean Air Fund that will help local areas with the highest air pollution.

“The tax system can play an important role in protecting our environment. We owe it to our children that the air they breathe is clean. We published our Air Quality plan earlier this year and we said then that we would fund it through taxes on new diesel cars. From April 2018 the first year VED rate for diesel cars that don’t meet the latest standards will go up by one band. And the existing diesel supplement in Company Car Tax will increase by 1%. Drivers buying a new car will be able to avoid this charge as soon as manufacturers bring forward the next-generation cleaner diesels that we all want to see.

Local authorities will be able to use money from the Clean Air Fund to help people adapt as steps are taken to reduce air pollution. Possible ways the money could be spent include reducing the cost of public transport for those on low incomes or modernising buses with more energy efficient technology. 

The cost of travel

Hammond pointed out that changes to the tax status of diesel engines did apply to not light commercial vehicles. “We only apply the measures to cars,” he said. “So, before the headline writers start limbering up let me be quite clear: No white van man (or woman) will be hit by these measures.”

While the government is investing in electric cars, fuel duty will remain frozen for an eighth year, saving drivers £160 a year on average.

The cost of travel is also an important factor for families and businesses. "I will, once again, cancel the fuel duty rise for both petrol and diesel that is scheduled for April," said Hammond. “Since 2010, we will have saved the average car driver £850, and the average van driver over £2,100, compared to Labour’s escalator plans. Fuel duty has now been frozen for the longest period in 40 years, at a total cost to the Exchequer of £46bn since 2010.”

Another transport levy, Air Passenger Duty, will be frozen for all economy passengers and all short-haul flights, meaning 95% of passengers will not see an increase in their Air Passenger Duty. It will rise for premium fares on long-haul flights and on private jets, a move that led to a dig at Formula One champion Lewis Hamilton: “From April 2019, I will again freeze short-haul Air Passenger Duty (APD) rates and I will also freeze long-haul economy rates. This will be paid for by an increase on Premium class tickets, and on private jets. Sorry Lewis. For those who don’t stretch to a private jet, I can announce a new railcard, for those aged 26-30, giving 4.5 million more young people a third off their rail fares.”

Funding for transport across England

Hammond confirmed already announced funding of £1.7bn for improving transport in English cities. Half will be given to Combined Authorities with Mayors, and the rest allocated by a competition.

An extra £337m will go towards a fleet of new trains on the Tyne & Wear Metro. An additional £6m will also go towards the Midlands Connect motorway and rail projects. 

Transport links along the Cambridge-Milton Keynes-Oxford corridor will be improved by: completing the rail link between Oxford and Bedford, and Aylesbury and Milton Keynes; setting up a new East West Rail Company to speed up work on the rail link between Bedford and Cambridge; £5m to help develop plans for Cambridge South Station; and building the Expressway road between Oxford and Cambridge

“Far too much of our economic strength is concentrated in our capital city. If we are truly to build an economy that is fit for the future then we have to get all parts of the UK firing on all cylinders,” he told the House of Commons. “Today, we back the Northern Powerhouse, the Midlands Engine and elected mayors across the UK with a new £1.7bn Transforming Cities Fund. Half to be shared by the six areas with elected metro mayors to give them the firepower to deliver on local transport priorities. The remainder will be open to competition by other cities in England.

“We’re investing £300m to ensure HS2 infrastructure can accommodate future Northern Powerhouse and Midlands Engine rail improvements. I am also providing £30m to trial new solutions to improve mobile and digital connectivity on trains, on the TransPennine route. 

“We’re developing a local industrial strategy with Manchester. And I’m pleased to announce a second devolution deal with Andy Street in the West Midlands. We’ve agreed a new devolution deal with North of the Tyne. And we’ll fund the replacement of the 40-year-old rolling stock on the Tyne and Wear Metro at a total investment of £337m.”

Hammond added that the Treasury is continuing to work with Transport for London on the funding and financing of Crossrail 2 and will also make over £1bn of discounted lending available to local authorities across the country to support “high value” infrastructure projects.

Money for Scotland, Wales and Northern Ireland

The devolved administrations will get increased spending power in devolved areas, including education, health and transport, said Hammond. Each devolved administration can decide where this will be spent:

  • Scottish Government: An increase of £2bn
  • Welsh Government: An increase of £1.2bn
  • Northern Ireland Executive: An increase of £660m.

Hammond confirmed that tolls on the Severn Bridge will be abolished by the end of next year. 

In relation to Northern Ireland, he said: “We’ll deliver on our commitment to review the effect of VAT and APD on tourism in Northern Ireland, reporting at next year’s Budget. And we will open negotiations for a Belfast City Deal as part of our commitment to a comprehensive and ambitious set of city deals across Northern Ireland.”

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