Chancellor earmarks £2bn for automotive industry in tax-cutting Autumn Statement

2:26 pm, November 22, 2023

The government has earmarked £2bn to help the automotive industry transition to all-electric motoring as part of its Autumn Statement.

Jeremy Hunt today announced a raft of tax cuts, tighter welfare rules and further measures aimed at getting more people into work.

Among the chancellor’s pledges was a promise to set aside £2bn in grants and loans for the automotive industry to assist in the journey to electrification.

The Treasury also confirmed that £50m will be made available for apprenticeships in engineering and skill shortage areas.

The news has been met with a generally positive response from industry experts, although some have raised concerns about a lack of support for used EV buyers.

Philip Nothard, chairman of the Vehicle Remarketing Association, said: ‘It was encouraging to see a £2bn investment in zero emissions manufacturing, although given the scale of global spending on EV investment, this is a relatively small amount.

‘There’s also no sign of additional help to support electric cars in the used car sector.

‘We know that large numbers of EVs are about to enter the remarketing cycle and that there isn’t necessarily the demand in the market to soak up that volume.

‘Measures such as subsidies or interest-free loans may be needed at some point before the end of the decade.’

Edmund King, AA president, added: ‘To help smooth the electrification journey, the AA welcomes plans to speed up access to the grid, investment in zero emissions within the automotive industry and funding to attract new engineers into the sector.

‘We would still like to see incentives for drivers to help them to take part in the zero emission transition when they are ready to do so.

‘Hopefully these incentives, a further freeze in fuel duty, and a cut in insurance premium tax will be outlined in the spring Budget.’

Auto Trader also welcomed the news but said more needed to be done if automotive jobs were to be saved.

Ian Plummer, commercial director at Auto Trader said: ‘ The chancellor’s commitment to full expensing is very welcome as, without incentives for the automotive sector to invest, building battery capacity for the UK’s much-heralded transition to electric vehicles becomes that much harder to achieve.

‘Warnings from MPs this week of a “gigafactory gap” which could cost 160,000 jobs in the automotive industry only underline the urgency of the problem.

‘Producing batteries at home will also bring down the cost of electric vehicles for consumers, which is critical as the current upfront cost of the cars is stifling any meaningful levels of adoption.

‘The Treasury has earmarked £2bn in grants and loans for the automotive industry and this should help them get more bang for their buck.’

UK left lagging behind on battery manufacture for electric vehicles say committee of MPs

Other countries offer direct subsidies, lower energy costs, trained workers and help securing critical minerals

Pressure on Hunt to do something at Autumn Statementhttps://t.co/6ZVBW9lK5e

— Doug Parr (@doug_parr) November 21, 2023

Among the less positive responses was Close Brothers Motor Finance, which said the measures didn’t remove barriers to entry into the EV market.

Director of sales Lisa Watson said: ‘More than two thirds (68 per cent) of dealers stated earlier this year that a lack of charging infrastructure is the biggest barrier to drivers buying an electric or hybrid vehicle, so while the chancellor’s planned investment in electric car manufacturing will be welcome news to dealers and motorists, it doesn’t appear to address the need for infrastructure.

‘Adequate investment is needed for the UK to finally step up its efforts to cater for a shift to alternative fuel vehicles. With the 2030 ban having to be pushed back, this will be critical to reaching the revised 2035 target.

‘Despite barriers in place, two-in-three (64 per cent) motorists surveyed would consider buying an electric vehicle, so demand is there should the infrastructure be in place.’

James Tew, CEO of iVendi, added: ‘There’s little in the Autumn Statement that is likely to have much direct effect on the fortunes of car dealers and the issues that they currently face, especially when it comes to how the used sector will absorb the growing numbers of EVs that will arrive over the next year or two.

‘However, the various measures designed to help investment, especially full capital expensing, are good news and no doubt some automotive retailers will take advantage of them, while the national insurance cut will potentially provide a little more financial flexibility for car buyers.

‘After the various substantial blows that the economy has taken in previous years, the chancellor is keen to promote a narrative that we’re back on track and that might be a stretch, but we might at least be entering a phase where things have stopped getting worse.

‘In its own way, this is to be welcomed.’

What has been announced?

The speech, delivered to the Commons today (Nov 22), is the chancellor’s main opportunity outside of the Budget to make tax and spending announcements.

Hunt used the statement to introduce changes aimed at reviving both the UK’s struggling economy and the Tories’ election chances.

The chancellor has said the package in full contains 110 measures he hopes will boost growth.

He cut national insurance for 27 million people in a highly political statement ahead of a general election expected next year.

The two percentage point reduction in the main rate will save someone earning £35,000 more than £450.

Hunt announces a 2% cut in the main rate of national insurance. This will take effect on 6 January. For those on average earnings, this is in effect a tax cut of £450 a year

— Robert Peston (@Peston) November 22, 2023

The chancellor also confirmed that a tax break allowing firms to cut their tax bills if they invest in new equipment will be made permanent in what he claimed was the ‘biggest business tax cut in modern history’.

He said his plan will ‘raise business investment, get more people into work, reduce inflation’ and increase the size of the economy.

Hunt said universal credit and other benefits will increase by 6.7 per cent, in line with September’s inflation figure, ending speculation the government could have used the cheaper October figure.

Meanwhile, the finance minister also confirmed the triple-lock formula for state pension rises would be implemented as usual, meaning the state pension will rise by 8.5 per cent in line with average earnings – worth up to £900 more a year.

There will also be £1.3bn of funding to offer ‘extra help’ to 300,000 people who have been unemployed for more than a year, and an extension of the 75 per cent business rates relief for retail, hospitality and leisure until 2025.

Despite the measures, the Office for Budget Responsibility has now downgraded the UK economic growth forecasts for the next three years.