Written evidence submitted by the Federation of Small Businesses (EVP0034)

This is a response to the open consultation Net Zero Emission Vehicles and Road Pricing on behalf of the Federation of Small Businesses (FSB). We welcome the opportunity to respond to this consultation.

The Federation of Small Businesses (FSB) is the UK’s leading business organisation. Established over 40 years ago to help our members succeed in business, we are a non-profit making and non-party political organisation that is led by our members, for our members.

Our mission is to help smaller businesses achieve their ambitions. As experts in business we offer our members a wide range of vital business services including legal advice, financial expertise, access to finance, support, and a powerful voice in government. FSB is the UK’s leading business campaigner focused on delivering change that supports smaller businesses to grow and succeed.

Our lobbying arm starts with the work of our team in Westminster, which focuses on UK and English policy issues. Further to this our expert teams in Glasgow, Cardiff and Belfast work with governments, elected members and decision-makers in Scotland, Wales and Northern Ireland.

FSB fully supports the government’s Climate Change agenda and has welcomed the Prime Ministers ‘Ten Point Plan for a Green Industrial Revolution’ put forward last year.

Furthermore, the UK’s SMEs are enthusiastic about the future and understand the role they have to play in the shift to a carbon neutral economy.

However, businesses will require policy certainty, a just transition within an achievable timeline and a roadmap to be in the position to comply with the ambitious government’s Net Zero strategy.

In November 2020, FSB and the UK’s top five business groups – the Confederation of British Industries (CBI), Make UK, the Institute of Directors (IoD) and the British Chambers of Commerce (BCC) came together to highlight their commitment to helping the UK achieve its goal of becoming Net Zero by 2050[1].

The group collectively called for a ‘principles-led’ approach from the government to guarantee a ‘just transition’ to Net Zero and identified five core principles required to achieve this goal:

1. Ambition – ensuring we hit our targets, led by evidence
2. Accountability – providing coordinated and coherent leadership
3. Delivery – empowering businesses to find their own paths
4. Opportunity – not leaving any sectors or regions behind
5. Cost – affordable and achievable, based on impact, ability to pay, and potential to gain

We urge the government to follow this ‘principles-led’ approach when developing regulatory and policy frameworks for the acceleration of zero emission vehicles and the development of a road charging.

With 93 percent of small business owners in urban areas and 95 percent in rural areas stating that the car is essential to their businesses, the imminent ban on all new diesel and petrol vehicles and reform of Vehicle Excise Duty (VED) and Fuel Duty will constitute a difficult challenge.

FSB supports road pricing to solve the sharp decline of income generated from Fuel Duty and Vehicle Excise Duty (VED). FSB plans to investigate further road pricing among our members in a comprehensive survey in 2021. We would welcome an opportunity to share our conclusions with the Committee.

In the meantime, we invite the Committee to consider the principles of fairness put forward by FSB, CBI, Make UK, IoD and BCC as a roadmap to achieving a fair and just transition to Net Zero.

We trust that you will find our comments helpful and that they will be taken into consideration.

Accelerating the shift to zero emission vehicles

The feasibility, opportunities, and challenges presented by the acceleration of the ban of the sale of new petrol and diesel vehicles to 2030

We support the government’s ambitious plan to ban the sale of all new petrol and diesel vehicles by 2030. Moreover, small businesses want to be part of the solution on climate change and understand the role they have to play in the transition to Net Zero.

However, the ban of new petrol and diesel vehicles sales from 2030 must take full account of the potential impact on Small Businesses.

The affordability of zero emission vehicles, the limitations to the range of zero emission vehicles and the current fragmented charging network are significant concerns for small businesses.

Businesses that have to renew their fleet after 2030 will have to be able to afford new vehicles that are fully functional to their needs. There is currently no solution for supporting the affordable development and rollout of more environmentally friendly HGVs. The government must assure businesses that a comprehensive charging network will be in place before 2030.

A firm government commitment for R&D investment will undoubtedly accelerate breakthroughs in innovation regarding vehicle range and affordability. We recommend developing a strategy to have a comprehensive charging network in place within a decade, which should enable a smooth transition.

FSB welcomes the recently announced £40 million boost for electric vehicle charging schemes, which should be opened to small businesses and beneficial in rural parts of the UK.

The actions required by Government and private operators to encourage greater uptake of electric vehicles and the infrastructure required to support them

In line with The Fairness Principles put forward by FSB, the government’s ambitious goals must match the reality of the challenge of accelerating the uptake of electric vehicles.

The government needs to consult small businesses when building policies to offer a diverse set of business-led solutions and incentives required for a frictionless transition. By inviting businesses into the conversation and creating a level playing field, businesses will have a fair chance to appropriately address the necessary long-term changes and plan budgets.

Finally, the transition to Net Zero must remain affordable and achievable for businesses.

We encourage manufacturers and the government to address the challenges of range and costs of vehicles together with the price and longevity of batteries.

Whilst most businesses should be able to complete the transition, we recognise that a small number of businesses will require targeted support from the government. In addition to financial incentives for early adopters, we recommend a business-focused campaign that demonstrates to businesses the latest progress made, such as technology development and charging infrastructure. Active support from Local Authorities, as the first-point contact, will furthermore help navigate the transition.

Finally, workshops and regular updates are essential to ensure that no business is left behind. Organisations such as FSB will be able to accumulate the overall small business sentiment and concerns in this transition.

Road pricing

The case for introducing some form of road pricing and the economic, fiscal, environmental and social impacts of doing so

For small businesses, a car or van is an essential tool of the trade. Businesses rely on road transport to move goods around the country, meet customers and suppliers, or perform the very nature of their business. Therefore developing any new road pricing scheme will directly affect them by potentially impacting business growth, business operations and overall regional economic growth.

The phasing out of petrol and diesel cars and the increase in zero emission vehicles will greatly impact the government’s revenue. In 2018/2019 road vehicles raised approximately £40bn in taxation, which corresponds to 6.3 percent of total government revenue. As electric vehicles (EV) currently pay no fuel duty or Vehicle Excise Duty (VED) continuation of the current system would make the VED system and fuel duty generated revenue obsolete thus decreasing government spending power.

On average, 89% of the total passenger km travelled in a year is travelled by road, 7% by mainline rail, and 4% by other modes. Any reduction in road vehicle taxation is likely to reduce public transport use and increase road traffic, increasing road congestion and associated pollution. An increase in vehicle taxation may well have the opposite effect, supporting the government’s goal to encourage more multi-modal trips.

Finally, the Select Committee will have to consider the environmental impact of zero emission vehicles. In addition to the energy used for their construction and end of life processing, battery packs require considerable energy inputs and use of scarce materials. Furthermore, EVs impact the environment due to the abrasion of tyres and breaks.

The replacement of petrol and diesel cars by zero emission vehicles will not alleviate the burden of congested cities and motorways, particularly if running costs are reduced. Vehicles will continue to adversely impact on the quality of life in cities and towns and hence alternative travel modes and micro-mobility have to remain primary modes of transport, particularly for short distances.

A fair road pricing system that maintains the current overall level of charging whilst focusing on charging those vehicles, which have the greatest impact on the environment and congestion, will help address these challenges.

The level of public support for road pricing and how the views of the public need to be considered in the development of any road pricing scheme;

As previously highlighted, for 93% of small business owners in urban areas and 95% in rural areas, the car is a crucial part of their business. Therefore, as part of the public, businesses will be directly affected by a new road pricing scheme without an option to substitute most of their road journeys by another transport mode. We urge the government to engage with businesses directly and avoid making the same mistakes as those made during the development of Clean Air Zones. While companies understand the real urgency of lowering emissions in our cities, the hurried development of Clean Air Zones now leaves businesses with a financial burden – with some unable to afford driving into CAZ.

Therefore, we urge the government to take businesses on-board this transition from the beginning. This will help the government understand the challenges and opportunities of a new road pricing scheme for businesses.

A new road pricing scheme should be fair and allow businesses to factor in the costs without negatively impacting their business activity and their economic contribution to the UK.

February 2021

Endnote