Alphabet calls on public sector to hold-fire and review mileage rate cuts
The projected £600,000 North Lincolnshire Council plans to save by cutting its staff mileage rate from 52p a mile to the HMRC-approved level of 45p (reported in August 2012) is one case among several cited by Buhagiar which illustrates the point. He said: ‘While I fully understand the council’s wish to reduce all reasonable operating costs within its organisation, I wonder if the management team are missing a trick here by not fully exploring alternatives which could achieve greater savings, while supporting their desire to remain responsible employers.’
While these figures are based on typical industry costs, a simple calculation indicates that similar organisations looking to reduce mileage rates could do a lot better by looking at well proven fleet solutions, such as shared pool car schemes as opposed to cutting mileage rates, says Buhagiar.
He explained: ‘If we take the headline £600,000 saving and divide this by 7p per mile, this gives us the figure of 8,571,429 (the number of business miles reclaimed every year.) If we multiply this mileage by 45 pence per mile (new rate), this gives us a cost of £3,857,143 fuel cost for their “grey fleet”, assuming this is over a three-year cycle.
‘If they had switched to a typical diesel pool car fleet (sub 1600cc), the HMRC rate is 12p per mile, giving a fuel cost of £1,028,570, based on 8,571,429 miles. If we then assume a £2,000 rental per year and base this on 100 cars, this comes to a total hire cost of £600,000 over three years. Assuming an insurance cost of £600 per car per year, this comes to £180,000 over three years, making the total cost of the pool car fleet over the period, £1,808,570. This gives us a saving of approximately £2 million over the “grey fleet” choice every three years,’ he added.
This is a significant saving which does not even include the additional cost and potential exposure to the risks posed by poor management and monitoring of the grey fleet such as licence checks, accident management and driver training.