Approved Mileage Allowance Payment Rate

Peter Gibson Excerpts

Monday 3rd July 2023 Westminster Hall

[Kenny MacAskill (East Lothian) (Alba)]

It is a pleasure to serve under your chairmanship, Mr Sharma. I pay tribute to the hon. Member for Carshalton and Wallington (Elliot Colburn) not only for the eloquence with which he presented his argument, but for its very balanced nature. This issue unites the Chamber; there is almost a manifest injustice here. There is little that has not increased since 2011, and there has been a significant number of elections, never mind of changes in office. As he correctly pointed out, it is not simply the voluntary sector that is affected. Not only those employed by the council, but those who are self-employed—the traditional white-van man and those in other occupations—also need recompense for the mileage that they are required to do to carry out their trade, their services or whatever.

In a matter that I have been pursuing locally it has often been put forward that there can be local settlements, but, as the hon. Member correctly pointed out, the template tends to be HMRC’s and there are implications for taxation if that is not followed. Even when I have had negotiations and discussions with officials, it has been very difficult to get political sign-off, so it is one thing for officials to be persuaded. There are Members here who were at the meeting held by Unison along with the RAC Foundation. Although some might view Unison as having a vested interest, I do not think that that can be said about the RAC Foundation.

[Peter Gibson (Darlington) (Con)]

I, too, was at the Unison-organised meeting and I can say only positive things about its engagement with Members right across the House. Let me put on the record my thanks to Anna Birley from Unison for the report that she so ably prepared.

[Kenny MacAskill]

Absolutely. I am sitting with a copy of the report myself and the hon. Member is correct; there were people from a variety of parties at the meeting. The RAC Foundation was not there in a political capacity. I think Unison did the right thing to hold the meeting with the RAC Foundation. It gave the meeting ballast and legitimacy because the RAC, along with the AA, is a specialist in motoring matters and has come to the conclusion that 63p, together with some form of system, is what is necessary.

Locally, I face all the difficulties that the hon. Member for Carshalton and Wallington ably pointed out. East Lothian is not the biggest constituency—it is not the size of some of those in the highlands of Scotland—but it is still significant. It runs along the A1 for in excess of 60 miles, from Musselburgh all the way to the villages before the Scottish Borders. Although the principal town tends to be Haddington, with the community hospital hub and the council based there, people are unable to work without going into the other towns, which are equally jealous of their independence and seek to retain their own facilities, whether it is those on the coast such as Dunbar, where I live, and North Berwick, or inland at Tranent or elsewhere, never mind the small villages. Whether someone is doing voluntary work, working for the council or carrying out a trade, they cannot do their job without running up significant mileage.

We are not only talking about those working in fields such as care. There are people in senior positions and health visitors who are struggling financially because, as with others, they have seen their mortgage go up while they have to keep a roof above their head, yet it costs them to work because they are not recompensed for the daily mileage that they rack up. They need a car to carry out their work on behalf of their employer, and they have to pay additional costs to do that. That is why the issue has to be taken on board.

The hon. Member for Carshalton and Wallington correctly pointed out that we should not just seek to remedy the mileage allowance once and then have to look at it again; it could be worthwhile to make it index linked. As the hon. Member for Darlington (Peter Gibson) will be aware from the meeting I mentioned, we also have to bear in mind that when the allowance is paid by employers, it is meant to recompense workers not simply for the cost of fuel—the £1.45 that the hon. Member for Carshalton and Wallington mentioned resonates with what Asda is currently charging in Dunbar—but for the wear and tear on their cars and for insurance.

One of the most significant things that I learned from the RAC Foundation was that fuel costs had increased at the lowest rate; insurance, as I recall, had increased at the highest rate, but other things had increased too. Not only do people have to pay for their petrol or diesel, but they have to pay the car costs that are necessary for their work and that their employer expects them to pay, because otherwise they cannot do their job. That is certainly true in my area, but it is the same in others, whether they are urban or rural. That is why the mileage allowance should be increased.

There is, as I say, political buy-in from across the Chamber. There is a recognition, not just from trade unions but from motoring organisations, that the rate is long past its sell-by date. It is clear from what others have said that this is not simply about people struggling to do their work, but about getting people into the labour market—a statement is being made elsewhere in this building on that very subject. People must be recompensed for their work and not pay out of their own pocket to do their job.

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[Peter Gibson (Darlington) (Con)]

It is a pleasure to serve under your chairmanship, Mr Sharma. I congratulate my hon. Friend the Member for Carshalton and Wallington (Elliot Colburn) on ably leading yet another Petitions Committee debate. Thirty-eight of my constituents in Darlington have signed the petition, but I know that it is an issue of great importance to many more. Mileage rates were first introduced to reflect the costs of using a vehicle for work and to make reimbursing them administratively straightforward. However, as we have heard, HMRC’s current rates have not changed since 2011, despite many increases in the cost of motoring, particularly the rapid increase in fuel prices that began in early 2022 as a result of Putin’s illegal war in Ukraine.

It is estimated that one in five frontline service workers are required to drive to do their job, often travelling significant distances to carry out their work. Moreover, research from the RAC Foundation shows that the vehicle of a public sector worker who drives for their job is typically older and driven further than the average. As that will result in a greater effect on the servicing and depreciation of their vehicle, it is clear that a significant number of those workers will be left out of pocket by the present mileage allowance payment rate.

I welcome that the mileage allowance of NHS workers under the agenda for change agreements are reviewed twice a year, taking into account changes in motoring costs, and I know that current NHS mileage approved payment rates were increased on 1 January 2023 to 59p per mile. That is above the HMRC approved amount. Although the approved mileage allowance payment rate is advisory, it is ultimately up to employers to choose what they reimburse. It is still hugely important to public sector workers, charities and many others in society that mileage rates are reviewed across the board regularly, and not just for those working in certain sectors.

It would be remiss of me to not mention that, compared with others in the region, many of my constituents face another issue when it comes to the cost of motoring. Fuel prices at forecourts are significantly higher at Morrisons, Asda and Sainsbury’s branches in Darlington than they are at the exact same supermarkets in Bishop Auckland, so I ask the Minister to look at what more can be done to ensure that my constituents get a fair deal. I appreciate that it is not the specific topic of this debate, but it highlights the postcode lottery of forecourt fuel competition in this country.

Unfortunately, my hon. Friend the Member for Rutland and Melton (Alicia Kearns) was unable to attend today’s debate. However, she has asked me to raise her concerns on her behalf. Her constituency is made up of 187 villages, with a number of elderly residents relying on incredible carers who get to them by car. We face a similar issue at Herriot hospice in Harrogate, of which I am a trustee. I know all too well about the impact of mileage rates on those who take part in rural community hospice care. An increase from 45p to 60p per mile would be of significant benefit to people such as carers, and I know that my hon. Friend also supports an increase in mileage rates.

I appreciate the efforts that the Government have taken to support motorists with increased costs. At the spring statement this year, the Government announced a temporary, 12-month cut to fuel duty of 5p per litre. Furthermore, to continue supporting motorists, they are extending the 5p fuel duty cut, which is worth £100 a year to the average driver. Ultimately, the Government have to balance support for individuals with the responsible management of public finances, which fund our essential public services, but it is clear to me, and should be clear to the Minister, that mileage rates need to be looked at very closely. I urge him to do all he can to ensure that we see this vital increase and that public sector workers who drive for work are not left out of pocket merely for doing their job. The Minister should be mindful that the HMRC mileage rate is used as a benchmark for many charities, voluntary groups and small businesses. Although it is up to such organisations to set their own rate, they take a lead from HMRC.

Public sector workers, charities, volunteers and small businesses need to see a change in the rates. I trust that the Minister can see that this has cross-party support, and reform would be welcomed by people in every constituency. Please, let us level up these mileage rates.

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[Gareth Davies]

That is a fair question. I assure the hon. Lady that an extensive review is taking place, which takes into account a range of factors, but a big part of it is engagement. We have engaged extensively with various industries and unions, and we will continue to do that around the fiscal event cycle, as I have said. All taxes remain under review.

I have magically received an answer to the hon. Lady’s earlier question: between 1.8 million and 2.1 million people use their own vehicles for business travel, and 200,000 employees claim mileage allowance relief. That is 40% of all those entitled to it. I hope that answers her question.

I am coming to the end of my remarks, but I want to ensure that I address as many points raised as possible. My hon. Friend the Member for Waveney made points about the importance of NHS staff, and I want to put on record my thanks to all NHS workers who use their own cars. I entirely agree with the emphasis he put on the importance of those workers to our society. I stress that paying the AMAP rate is voluntary. It is up to the NHS as an employer to determine expense rates. Travel cost reimbursement is covered by NHS terms and conditions, jointly agreed between trade unions and the employer. As my hon. Friend the Member for Darlington (Peter Gibson) pointed out, as of January 2023, the NHS increased its rate above the AMAP rate to 59p for cars up to 3,500 miles, in recognition of the fact that a number of NHS workers travel a shorter distance.

[Peter Gibson]

I am grateful for the clarification. Will the Minister clarify why it is right and fair for that scheme to apply in the NHS, but not outside it?

[Gareth Davies]

As I said, the scheme is voluntary. Any organisation can apply a higher rate than the AMAP rate, and the NHS has chosen to do that. If my hon. Friend believes that other organisations should offer a higher rate, that is something he should take up with them.

[Peter Gibson]

I am grateful to the Minister for giving way again. Will he outline what tax consequences there would be if an organisation chose to take those higher rates?

[Gareth Davies]

If a rate is provided that is above the AMAP rate, national insurance and income tax would be applied to that difference, depending on the personal circumstances of the individual—for example, depending on the overall amount of income tax they pay, or whether they are over the personal allowance amount. Voluntary organisations, which my hon. Friend spoke about, can offer any rate they want, as I pointed out to my hon. Friends the Members for Waveney, and for Carshalton and Wallington. So long as evidence is shown for the journeys, organisations do not have to use the AMAP rates. I hope that clarifies things.

In conclusion, it is ultimately for employers to determine the expenses paid in respect of motoring costs that employees incur with their private vehicles. The Government set AMAP and simplified expenses rates with the aim of creating administrative simplicity. Those rates will necessarily be more appropriate for some motorists than others. However, the Government have taken decisive steps to support households with the costs of living, which I have extensively set out. The Government will continue to keep AMAP and simplified expenses rates under review, as they do all taxes and allowances.