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Saturday, 8 August 2009

Govt encourages cycling - a great sucess (for the middle class cycling enthusiasts and bike retailerst)

There is a scheme run by the govt to subsidise bikes and cycling equipment for use to get to work. The cost of the bike & equipment (helmet, lycra shorts etc) are deducted from salary before tax and NI, so that's almost a 50% discount for a higher rate tax payer. The company buys the bike up front and leases it t the employee by salary sacrifice. The bike is carried on the company's books as capital, so gets a deduction for it and the employer's NIC is not paid, either.

What a great idea you may think: getting people out of their cars and onto bikes; great for the environment, great for their health.

So why am I pissed off about it:

I don't live within a reasonable cycling distance to work (in fact my office has just been relocated 14 miles further from home) so its not a benefit I can take advantage of. You can't get a nice bike if you don't ride it to work, though how HMRC will be checking this I don't know.

You can't get a bike for your kid to cycle to school, even if you drive them there at the moment.

If someone was driving to work, the decision to change to cycling can be funded entirely from the saving in petrol. Or if taking a bus or train, by the savings in fares.

All the people I know taking advantage of the scheme already have a bike, in some cases lots of bikes. They are using the scheme to buy enthusiasts' bikes costing £1000. I don't know of anybody buying a bike for the first time under the scheme.

If you don't have a bike and you want to start to cycle to work, you can get a new bike for £100, £50 at a boot sale or free on freecycle. The scheme effectively has a £1000 upper limit.

The scheme is only available if your employer feels like offering it and operating it through the payroll dept, although the employer also receive subsidies for running the scheme. The lower paid you are, the less likely your employer will be willing or able to run the scheme.

The scheme gives tax and NI relief on the payment, so it is much more advantageous to higher rate tax payers. Low paid workers presumably aren't as worthy as their middle class managers of a subsidised bike.

As a result, the scheme is not being used by the needy. Poor working class taxpayers are subsiding nice bikes for middle class people who have nice bikes already. Is this what the govt is supposed to be doing?


2 comments:

  1. Excellent dismantling of a shit subsidy. But then again, all subsidies are shit.

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  2. The other consideration is that if the employer owns the bike and only leases it to the employee (I'm assuming until it's paid for?) then does the employer bear any responsibility for the upkeep of the bike? Can't forget the potential 'elf and safety issues should an employee on a leased bicycle have an accident or commit some kind of traffic offense.

    Also the scheme leaves employers open to loss if an employee leaves (or is fired).

    If the subsidy was direct at point of purchase, and did not leave the employer potentially vulnerable, then many more businesses might encourage the scheme.

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