Chancellor Alistair Darling has urged retailers to pass on the VAT savings to customers as quickly as possible.
Car dealers can therefore expect a flurry of revised price lists from manufacturers, keen to pass on substantial savings to high-value goods.
The 2.5 per cent reduction will mean a saving of around £325 on a £15,000 car. This is much more significant than on cheaper goods, and will provide dealers with a welcome sales stimulus.
Road fund licence increases will be delayed, giving motorists more time to buy new greener cars. Increases for ‘gas guzzlers’ will also be capped at a maximum of £30.
Other highlights of the pre-budget report include:
• Temporary tax relief for businesses with empty properties
• £1bn Small Business Finance Scheme
• 45 per cent tax rate for those earning more than £150,000 from April 2011
• 0.5 per cent on National Insurance contributions from April 2011
The Chancellor has pledged to pump £20bn into the economy, as he forecasts Britain will officially enter into recession in 2009.
But to pay for this, taxes will rise on alcohol, tobacco – and, significantly, fuel. This appears to signal the end of the delay in introducing the fuel price escalator scheme.
Darling hopes the fall in world oil prices will offset any increases in fuel duty tax.
Come back to Car Dealer soon for full analysis as we get it – and the word from key figureheads in the industry…