Approved Mileage Allowance Payment Rate Debate

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Department: HM Treasury

Approved Mileage Allowance Payment Rate

Bob Seely Excerpts
Monday 3rd July 2023

(10 months, 3 weeks ago)

Westminster Hall
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Elliot Colburn Portrait Elliot Colburn
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I absolutely agree with the hon. Lady.

The mileage allowance payment rate currently allows volunteers to claim up to 45p a mile for the first 10,000 miles and 25p for each mile after that, yet the 45p rate has not been reviewed or increased since 2011. That affects not just charities but many employees of the variety of businesses that use the AMAP rate to regulate employees’ use of their private cars for business.

In their initial response to the petition, the Government stated that the rate

“is intended to create administrative simplicity by using an average, which reflects vehicle running costs including fuel, depreciation, servicing, insurance, and Vehicle Excise Duty.”

Indeed, I spoke to many stakeholders who agreed that the rate was probably the best approach for reimbursing volunteers and employees. It is easy to use and free from bureaucracy, and it minimises the burden of extra paperwork or the potential for inaccurate or incorrect payment.

The issue for the petition creator is not necessarily the system itself but the rate of the allowance. The “RAC Cost of Motoring Index 2011” concluded that that year was not an easy one for motorists; drivers had to contend with record fuel prices and a sharp increase in the cost of car insurance. Much of that remains true today—it is just a lot more expensive. All the costs associated with vehicle use have increased, but the disparity between today and when the AMAP was last adjusted is demonstrated most simply by the cost of fuel. The current average cost of petrol nationwide is 144.86p a litre, and diesel is at 145.54p. In 2011, the last time the rates were changed, petrol averaged 133.65p and diesel 138.94p.

Those averages do not reflect sporadic fluctuations over that time. One argument that has been made is that fuel costs were brought down by the temporary 12-month cut to duty on petrol and diesel of 5p a litre announced in last year’s spring statement, and the Government noted that in their response. Many people I spoke to in the run-up to the debate argued not just for a review of the rate but for regular reviews, which could take into account fluctuations and would make the system much nimbler, given the continuing uncertainty with respect to the costs of running a vehicle in general and of fuel specifically. Charities and employees could therefore properly fund and support those who currently find that the AMAP only partially covers the costs of running a vehicle, without fear of being penalised through the tax system for paying a more fitting rate.

The AMAP is only one way suggested to employers and charities to reimburse drivers. Some may argue that they could choose to pay more to reflect the increased cost of running a vehicle, but if a higher allowance is paid, an income tax and national insurance charge is placed on the difference. That is precisely why the petition was set up—to try to scrap the charge for those wanting to pay an allowance that better reflects the reality of driving a vehicle in 2023.

Can the Minister tell us how much revenue is collected through overpayment of the AMAP rate and how that would be impacted if the rate were raised to, say, 60p as outlined in the petition? It could be argued that with a more rigorous, up-to-date support system with regular reviews, our businesses and charities would be able to ensure that those using their vehicles for work or for volunteering are valued, and they would find it easier to retain them. The Government have worked to stabilise fuel costs by cutting fuel duty in the light of the knock-on effects of the invasion of Ukraine, among other factors. I believe that that stabilising work should filter down to our volunteers and workers through a regularly reviewed and increased AMAP rate.

The arguments in favour of the petition’s aims seem incredibly plausible, especially since, as I have noted—I am sure we will hear this a lot during the debate—the rate has not been adjusted since 2011. I hardly need to list the ways in which our world, our lives and the cost of things have changed over the last 12 years. Instead, in drawing my remarks to a conclusion, I will again draw Members’ attention to the workers and volunteers who have strived to get this country moving and growing over the last decade.

Bob Seely Portrait Bob Seely (Isle of Wight) (Con)
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It is a pleasure to listen to my hon. Friend, who is making incredibly important and sensible points. Does he share my hope that the Minister will listen very carefully to them? We have a very strong voluntary sector on the Isle of Wight. Mike Bulpitt, one of the lead volunteers on the Island and chief executive of a community action centre, contacted me because he is worried that a lot of our voluntary drivers will find it difficult to continue to volunteer due to the lack not only of an increase in the rate but of regular reviews. I say on his behalf that we thoroughly support what my hon. Friend is saying. Does he share my hope that the Minister is listening and feeling generous?

Elliot Colburn Portrait Elliot Colburn
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My hon. Friend is absolutely right. I know that the rate affects businesses and employees too, but the core principle is that volunteers, in particular, should not be penalised for their noble service and for giving up their free time to help others. It is clear that the rate is affecting the recruitment of volunteers to use their private vehicles at a time when those volunteers are so needed.