Approved Mileage Allowance Payment Rate Debate

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Department: HM Treasury

Approved Mileage Allowance Payment Rate

Jack Brereton Excerpts
Monday 3rd July 2023

(11 months ago)

Westminster Hall
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Jack Brereton Portrait Jack Brereton (Stoke-on-Trent South) (Con)
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It is a pleasure to speak with you in the Chair, Mr Sharma. I commend my hon. Friend the Member for Carshalton and Wallington (Elliot Colburn) for leading the debate and for an excellent speech. I am very happy to contribute to this important debate.

Although a relatively small number of my constituents— 38—signed the petition, the issue of mileage allowance payments looms large in my constituency and has been raised a number of times in correspondence and conversations with my constituents in Stoke-on-Trent South. Stoke-on-Trent is a hub for logistical industries and delivery operations of various kinds, and a larger than average proportion of the workforce works in health and personal care services. As we have just heard, social care is particularly affected by this issue, because people often drive their own vehicles to go to care for people in their homes. Stoke-on-Trent is a city that has no tube or tram network and a very limited local train network, and bus services have been in sorry decline for too long. I am glad to say that this Government have shown a real commitment to remedying that, but for those who have to travel beyond the usual commute for work, without a company car or other such vehicles, there is often no alternative to the use of private vehicles.

In 2011, it was recognised that the time had come for the main allowance to increase by 5p to 45p, because it had been held at 40p for nearly 10 years, since 2002. It has now been more than 10 years since that last uprating. At the very least, we need to look at the allowance again and undertake a review, as many colleagues have called for today. Of course, I accept that the last 10 years were somewhat different from the 10 years before them. In the decade up to 2011, fuel duties rose from 45.82p per litre to 58.95p per litre, but drivers incur a number of other costs, as many colleagues have said. In the decade after 2011, the fuel duty story was very different, thanks to this Conservative Government. Duty was cut to 57.95p per litre in March 2011 and then frozen for a decade until a cut of 5p per litre on 23 March last year—a cut we thankfully still enjoy today. I welcome the Government’s action. It benefits all motorists, and it is the simplest administrative measure available. Generally, I support the Lawson doctrine of lower tax rates funded by fewer tax breaks where possible, but there is clearly a need for a specific tax break, mileage allowance, to reflect the additional inflationary and other costs of using personal vehicles for work purposes. The system needs to be fit for purpose, and the rate needs to be appropriate to the current situation.

The Government say that they want to minimise administrative burdens, so the system needs to be simple and predictable. I wonder whether the employer’s discretion in using the AMAP rate really makes the system that predictable for the driver. There is huge variation in how the rate is applied, and many use a rate that is far less generous than the standard rate. Unfortunately, I have heard of a number of employers that are not even applying the 45p rate, never mind a higher one, and some workers are having to suffer much lower rates.

Many who do larger amounts of mileage, such as those who work in delivery or a trade that requires them to travel around the country, have been hit by the 10,000 mile advisory annual limit, after which the rate drops from 45p to 25p. I have spoken with a number of constituents in Stoke-on-Trent South who undertake trades that require them to travel up and down the country to work and deliver services. They often travel many more than 10,000 miles in a year, and they have to put up with a much lower rate after they have gone over the 10,000-mile limit.

I note that the website warns budding entrepreneurs and contractors:

“Whether you can claim, and how much, depends on an assortment of factors that can require a lot of admin to calculate.”

Notwithstanding that, I think that most colleagues would agree that the current mileage system has not been as pressing an issue historically. The petitions and letters campaign has appeared quite recently, because the feeling that the allowance rate is insufficient is now acute, particularly because of the post-pandemic inflationary pressures, which have been massively increased by Putin’s illegal invasion of Ukraine.

Even in the face of the freeze and cut in fuel duty, this issue continues to be a major challenge. To afford a more generous allowance, it has been suggested that the system be changed so that only certain sectors qualify for a higher rate. We have been talking about the social care and healthcare sectors, and a number of colleagues have mentioned the voluntary sector, wherein many people who voluntarily take parcels and things do so using their personal vehicles. It is potentially important to have a higher rate for individuals who are volunteering, and for organisations that are currently struggling to recruit volunteers because the rate remains at 45p, as it has for so long. The Government could certainly apply sectoral codes, as they do with other reliefs, such as the energy bill relief scheme, but deciding who is left out can lead to challenging outcomes, as I have found with the energy and trade intensive industries scheme, where some sectors have fallen through the cracks.

I do not underestimate how challenging the fiscal situation is. Over 10 years ago, the cost of increasing the allowance by just 5p was around £35 million per annum. That is quite a significant cost, but as the Treasury prepares for the autumn statement—now just weeks away—and the spring Budget, it needs to look at how the rates might be modernised to help with the cost of living pressures that many of our constituents are feeling, given that the rate has been frozen for so long. I hope that the Government and the Minister will consider the issue, and look into the potential for a review. I look forward to the Government’s response in due course.