The AA today said there was "some relief but little Christmas cheer" in the Chancellor’s Pre-Budget Report. The organisation welcomed the fact that the fuel duty increase due in April 2010 had not been brought forward as well as incentives for electric cars.

But it warned that the increase in VAT would hit drivers at the pumps and "give them a bumpy ride in the New Year".

Based on current prices, it said the increase in VAT to 17.5% from January 1st would add 2.36p to a litre of unleaded petrol (from 108.91p to 111.27p), and 2.4p to a litre of diesel (from 110.17 to 112.57p).

AA president Edmund King added: “We welcome plans to exempt electric vehicles from company car tax for 5 years. However, most sales reps would struggle getting up and down the M1 in the current range of EVs available. Hopefully this will encourage motor manufacturers to bring an iconic electric vehicle to market as soon as possible. The AA hopes that a good, affordable, stylish, well-performing, safe, longer range family electric car will come to market in the next few years.”

Sue Robinson, director of the Motor Industry Federation (RMI), agreed, adding: "We are conscious of the fact that demand needs to be stimulated as this is a very small sector of the new car market. Further, we welcome the extension of a 60 per cent vehicle allowance for electric vans; however this is still a relatively small percentage of the total market place."

Meanwhile, the Association of Convenience Stores (ACS) warned that the chancellor had led local shops down by ignoring calls for a delay in the reinstatement of the 17.5% VAT rate to February.

ACS chief executive James Lowman said: “Retailers are exceptionally disappointed by the Chancellor’s decision not to extend the 15% VAT rate beyond January 1st. The date of the increase does not give retailers adequate time to implement the changes over the holiday period, piles a major bureaucratic burden on retailers in what is the busiest time of the year.

“The immediate cost of the change will exceed £8million across the convenience sector industry.”

Lowman added that the hike in national insurance – which will increase by a further 0.5p from 2011 – was an unhelpful tax on jobs that would threaten local shops’ ability to provide valued jobs in the community.

Finally, he welcomed the freeze on corporation tax for small businesses, adding: “The Chancellor’s decision to defer the increase in corporation tax for small businesses is a welcome measure, and will offset some of the additional cost burdens announced in this budget.

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