Paul Barker grabs a cuppa and a chat with one of fleet’s most influential figures – David Rawlings, Director, BCF Wessex
Before becoming a director of fleet consultancy, advice and training services firm BCF Wessex, David Rawlings led Deloitte’s business car consulting team, and is deeply immersed in the world of company car taxation and what businesses need to know as we move through a turbulent period for the provision of company cars.
QThere’s a lot of concern about the Benefit-in-Kind tax changes announced in last November’s Budget statement. Is the Government trying to drive people out of company cars?
I think it’s an unintended consequence. The Government wants to try and tax people fairly, it still wants to incentivise technology and growth, but that’s scaring people. History has shown us that we like company cars, we’ve had perk cars and business cars, we’re used to them and they’re still showing up in surveys as one of the sought-after benefits.
STARING INTO A GAPING HOLE
If Government tax policy does push company drivers to opt-out of their vehicles, it will leave a big hole in its finances, because not only will the anticipated £295 million in extra revenue from the BIK changes on diesel cars not appear, but the existing revenue collected from those same drivers will also evaporate.
“You can look at it very naively and say actually, is it a problem losing it if you’re losing the cars off the road?
But you’re not losing the cars – those cars will still be there [but privately owned],” says Rawlings.
“So what are the Government going to do? Put it on fuel? How many years have we had of everyone being scared to touch the fuel escalator? So it’s not going on that. Stick it on VED? But it will go across everybody, so you’ll have everybody paying for the fact that they have killed the golden goose,” he continues. “Mileage charging? That will be done at a local level and won’t come back into Treasury, so general taxation is the only way. And if we’re in a position where we’re talking about austerity, the way to cure austerity is not to make the hole bigger”.
QIs the company car still the right thing for people?
In the right circumstances yes, it certainly can be, but the benefit of the company car is largely related to your personal circumstances.
For the first time for me in nearly 30 years I am standing there and saying the company car is not a slam-dunk. I can find you solutions with a company car, but then I’ve got to question whether that is going to help you recruit, reward and retain the people you want. If I have 100 cars that all do a very similar job for very similar people and they’re not bothered what they get, the guy is just delighted to have a small car, that’s fine.
But when you’ve got a big force of people that all have different egos (and salesmen have the biggest egos in the world), and that’s the biggest population of company car drivers, it’s not the same.
QDo the changes to BIK on diesel in particular have the unintended consequence of driving people into petrol cars where the driver wants low BIK?
It could do, but if you have got company car drivers who have been educated that diesel is good, I tend to think a lot of them are going to think that actually it’s the company car that’s bad rather than just diesel and they’re going to make uninformed decisions.
Plus, what’s going to be the next flip-flop decision when Government starts seeing, as we already know, that CO2 emissions are rising? I think there’s more to it than just diesel versus petrol, because we’re all jumping on the SUV bandwagon, but when they realise that what they have done on diesel company cars pushes people into petrol and CO2 goes up, are they going to be compelled to increase the bands on CO2 again because CO2 is bad and we need to tax people on it? It’s short-termism.
Unfortunately, when you’ve killed the market, whether it’s short-term, long-term whatever, you haven’t got a market any more. And the company car brings some very useful social benefits.
Plus for guys that have got a £35,000 company car, a lot of them haven’t got £35,000 to go and buy their own car, it’s a big jump. And with own vehicles, if you don’t establish ground rules for them then you have people running inappropriate, older, less efficient, less safe cars. With opt-out you’ve lost all control over it.
There will be people in a standard diesel car where they will say they don’t really care, so will buy a three-year old one. So they’re not going to benefit from the new technology and neither will we [from a health and air pollution perspective].
QIs there any cyclical element to this, where it will take a couple of years to wash through and people realise the control of a company car scheme might actually have been right all along?
How many times do we see this where you don’t know what you’ve got until you’ve lost it? I think what’s happening at the moment is that we are having that initial, unconsidered reaction – this is bad so get me out of here. Whereas in reality what we need to start thinking about is what is the most cost-effective, health-conscious, best-practice solution. We are on a journey and at the moment we’ve had the bad reaction and now we need the considered reaction, and what I think is that employers are going to need to realise that they cannot just bale out of cars. I may not want a company car but I still need a business car that I have control over.
What that does, though, is put the onus on the leasing company to stop selling off price and become a consultant; start sitting down with the client and working out policy. It might be that what the leasing company has to say is that you have 100 cars with us, what you really need is something like 73. They don’t like saying it, but I’d rather have 73 than none.
QIs the company car market going to disappear?
No, we’re evolving. I think we are going to have to come up with comprehensive, considered, well-thought-out solutions, and there will be different financing methods for them.
I think the companies that are considering mobility will win out, I think we’re going from fleet to mobility.
The other thing about this is that I hate having my own car. I hate the servicing, I hate worrying about it. When it comes to choosing your own car that you’ll live with for the next three years, you’ve got this massive conflict. If it’s somebody else’s problem it’s lovely, and I’m prepared to pay a premium for that.
People forget the cost of cars, maintenance, tyres etc. And with a PCP, people might have to find six payments in advance. And God only knows what they are going to find at the back end. When the car goes back, that’s when they see the value of a company car. You’ve still got to look after your company car but your fleet manager or operator has got some negotiation when he’s got 100 cars. When it’s me on a wet Thursday afternoon trying to fight one of the big manufacturers on what is fair wear and tear, it’s a completely different argument.
Taxation driving behaviour
The Government could have shot itself in the foot where it is using tax to influence new technology. If there is no-one driving a company car it’s very hard to use tax to influence it. If people have left the company car market it’s too late, because you’ll never get a sudden influx of people asking to set up a new company car scheme.