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news
Cyclists in London (image: Tomek Baginski on Unsplash)“Unfair” Cycle to Work scheme “problems” need to be addressed, admits government minister
The Labour government has admitted that it “absolutely recognises” there are “problems” with the current Cycle to Work scheme, which MPs have claimed is “unfair” and excludes people on low incomes from buying a bike or taking up cycling.
Simon Lightwood, the current Parliamentary Under-Secretary of State for Transport, made the admission that Cycle to Work – which has been the subject of criticism from both active travel campaigners and cycling retailers in recent months – needs to be addressed during Thursday’s transport questions in the House of Commons.
In September, cycling and walking charity Sustrans published a report which found that 38 per cent of people in the UK on low incomes or in unemployment (or around 1.9 million people) are currently priced out of buying a bike due to the high costs and lack of discounts available.
Introduced in 1999, the UK government’s Cycle to Work employee benefit scheme offers a tax-friendly initiative which enables people to buy a bike and cycling accessories through salary sacrifice.
However, the initiative excludes anyone who would earn less than the minimum wage of £17,000 a year once the salary deductions are taken into account, as well as those who are not in work, self-employed, or work for a non-participating employer.
The consequence of the scheme’s minimum entry point, Sustrans pointed out, is that just 30 per cent of people on a low income or not in employment have access to a cycle. On the other hand, data from Sustrans’ Walking and Cycling Index found that 59 per cent of people in professional occupations have access to a bike.
To help mitigate this disparity, Sustrans has suggested the introduction of a voucher scheme offering a 40 per cent discount on new bike and accessory purchases for people on low incomes, which would work in parallel with the current Cycle to Work initiative and, the charity argues, reduce the burden on the NHS, cut the number of sick days taken across the UK, improve access to work and education, and boost the local economy.
> Can 50% of Brits really not afford to buy a bike? Cycling and affordability discussed
Today in the House of Commons, the SNP MP for Aberdeenshire North and Moray East Seamus Logan asked transport minister Simon Lightwood what the Labour government was doing to address the concerns highlighted by Sustrans.
“The brilliant Cycle to Work scheme runs across the four nations of the islands, but under current rules, it can’t be used if you earn less than £17,000 a year,” Logan said.
“This is almost certainly contributing to the fact that only 30 per cent of people on lower incomes have access to a cycle compared to 59 per cent on higher incomes, that’s almost double.
“Various solutions have been proposed, including Sustrans’ suggestion of a voucher giving 40 per cent off the cost of a cycle.
“Can the minister do anything to address this unfair situation and help our national governments to support people on lower incomes who would like to be able to take advantage of the Cycle to Work scheme?”
Simon Lightwood (Official portrait, UK Parliament)
Responding to the question, Lightwood, the MP for Wakefield and Rothwell, said: “I absolutely recognise the problems that we have with that scheme and will be working closely with our colleagues in the Treasury regarding that.
“I was delighted to be at the launch of the report by Sustrans in the Palace [of Westminster] a couple of weeks ago and will be paying careful attention to the recommendations that they have placed in that report.”
Announcing the publication of their report into “cycling inequality” last month, Sustrans CEO Xavier Brice said: “A new UK Government brings new opportunities. Their focus on the economy, opportunity and health is critical, and integrating transport with walking, wheeling and cycling must be a part of this. To include those at all economic levels in this is a priority, or we risk leaving two million people to the dangers of transport poverty.
“The UK has 11.7 million people earning less than £17,000 per year or not in employment. People in this group are much less likely to have access to a car compared to the general population. For those who do, rising costs are making it unaffordable to run.
“The opportunity to get more people cycling is right here for the taking. The Cycle to Work scheme has existed for 25 years. Why shouldn’t the same opportunities be extended to the people that need it most – now?
“Using the Cycling Opportunity voucher scheme, we can tackle this inequality together and enjoy the benefits together too; for our bank accounts, our NHS and our environment.”
While Sustrans have suggested the creation of a scheme parallel to Cycle to Work, the initiative itself has come under strain over the past year, after senior figures from the cycling retail world met with MPs in January to make their case about the “need for urgent systematic change”.
The meeting came two months after the Association of Cycle Traders and bike shops hit out at one of the scheme’s main providers, Cyclescheme, for deciding to prevent retailers from charging additional fees on bikes purchased using the scheme, a move described by the representative of independent cycle retailers as the “straw that broke the camel’s back”.
“The ACT is calling for a collaboration of everyone in the cycle industry to work together to reform Cycle to Work as the priority growth strategy for the cycle trade and to increase cycling for all,” the association’s director Jonathan Harrison told the All Party Parliamentary Group for Cycling and Walking earlier this year.
Highlighting challenges for retailers with the current operation, he added that the scheme is too complicated: “Typically, the employer pays for the voucher, the provider owns the bike, the worker hires the bike, the voucher is paid back via salary sacrifice and there is often a misinterpretation around ownership and many users never truly understand how the scheme actually works.
“The end of the initial hire period is another area of complication which needs reviewing. Typically, workers enter an extended hire period after salary sacrifice finishes. During the extended hire period the bicycle was still owned by the provider, with some providers charging fees providing an additional source of income whilst others do not. Often these fees come as a surprise to the end user.”
Most importantly, Harrison suggested that the scheme no longer fits the purpose for which it was originally intended – to get people cycling to work.
After obtaining a PhD, lecturing, and hosting a history podcast at Queen’s University Belfast, Ryan joined road.cc in December 2021 and since then has kept the site’s readers and listeners informed and enthralled (well at least occasionally) on news, the live blog, and the road.cc Podcast. After boarding a wrong bus at the world championships and ruining a good pair of jeans at the cyclocross, he now serves as road.cc’s senior news writer. Before his foray into cycling journalism, he wallowed in the equally pitiless world of academia, where he wrote a book about Victorian politics and droned on about cycling and bikes to classes of bored students (while taking every chance he could get to talk about cycling in print or on the radio). He can be found riding his bike very slowly around the narrow, scenic country lanes of Co. Down.
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Think that's come up in that story and others before. "Because we expect to, we can. Because we can we'll fight anyone who says we shouldn't"?
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No. It's not using facts and instead making things up to suit your narrative.
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Nino Schurter - 2017; Won Cape Epic, won every XCO World Cup, and the World Championship.
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55 comments
You don't need a lot of money to enjoy being a cyclist. I have a friend who has eight bicycles that were thrown away and he got for nothing. They may not be ultra modern but they are all perfectly serviceable and cheaper to maintain than say a bike with hydraulic disc brakes. My hybrid trekking bike is a lovely alloy framed German bike from Corratec which was like new when I bought it for just £200.
It's never been a fair scheme from day one...
If your income is so low that you don't pay income tax, you can't benefit from the scheme. People earning the lowest incomes in our society would most benefit from a price reduction and help in spreading the cost of purchasing a new bike. But they are denied the assistance.
Then there are those who earn enough to pay income tax. They can save a whopping 21% according to the calculator I tried. Not bad I suppose, but I've had similar discounts in the New Year sales without any of the aggravation.
But what about those lucky enough to have a salary that warrants the higher income tax rate? Well, they can save 35%! Now we're talking.
So, the more you earn the greater the "discount" you can get on your £1000 bicycle. The scheme assists those who can already afford a new bicycle quite comfortably and turns its back on those who cannot. Although, I'm sure a high earner will likely purchase something costing more than £1000 and save even more money.
the problem I think is so much effort and debate goes into C2W schemes and how to fix it even though its not really that broken imo, it ends up with people thinking its the only way to buy a bike, and a bike must cost minimum £1000.
and no matter what you do to fix it or change it or renew it, that change wont encourage more people to cycle.
it will simply allow people who already cycle to buy another bike, that is and always has been the majority of people using C2W schemes, especially those in the 40% bracket, or those who complain you cant buy a bike for £1000 thesedays. (some schemes still do impose that limit).
One thing that doesn't get mentioned is that a large amount of employers (mine included) don't and won't offer a cycle to work scheme, it's either another burden to administer and finance or they don't care or see the benefit to their employees.
There should be one centralised loan system with tax break's that's accessible to all regardless of whether your employed or not, obviously with some limitations to stop people buying 12k superbikes tax and interest free.
I've tried to get my employer to join a scheme, but they insisted that it was too burdensome, especially with the business owning the bikes for a period of time and then being stuck with them (and possibly having to reclaim them) if the employee leaves before finishing the term.
Why?
Because rich people don't need any help to avoid paying their tax
The whole system is regressive. As above, do not earn enough to pay tax, no discount. Standard rate tax payer, standard rate discount. Higher rate tax payer, higher rate discount. It requires a whole new system.
C2W Is a tax efficency benefit for corporates and individuals. If the government was serious about promoting more cycling and encouraging all the benifits, they would remove tax from bicycle sales, peroid.
but that wouldnt promote more cycling. it would just make bikes slightly cheaper (Im sure the saving on tax would be converted to an increase in price since the market is used to paying the current price + tax) briefly and allow those already able to, to buy more n+1s.
Been saying it for years, cycling related items should be zero VAT rated. No forms, applications, income requirements etc, just a flat 20% discount to encourage cycling.
I'd give it a week before RRP goes up to somewhere near or equal to the original price. Also, zero rated does not equal 20% discount, it's actually a 16.667% discount.
I agree with Mark, so much retail pricing is dictated by "what will the punter pay ?" or "how high will the market stand ?" rather than "how much does it cost to make plus a reasonable profit"
you're seriously suggesting that a "cost-plus" pricing model yields more competitive pricing? The suggestion itself is an oxymoron.
It still makes sense to zero rate bikes even if the retailers are predicted to raise prices. Other items have been zero rated for VAT, so why is this a particular issue with bikes?
This is the problem - I have no idea whether the loaf of bread I'm buying would cost more if it wasn't zero rated.
Zero rating of goods & services only really helps the supply chain. Zero VAT is charged to the end customer at retail, on a price that may or may not have any relation to the costs of that item, it costs what people will pay (capitalism eh?). However if a good is zero rated for VAT (it's still a vatable item, just 0%), the suppliers within the supply chain can still reclaim the input tax at the various stages of manufacture and supply (on the "value-added" parts). It's just that the end retailer doesn't charge VAT on sale.
This is different from VAT exemption, where everything within the supply chain is exempt and suppliers cannot reclaim any VAT for input/supply costs. Interestingly, and unrelated to bikes, this is about to bite the government on the arse. Under EU law, non-commercial education was considered exempt from VAT (note, not zero rated). Now that private schools are about to be required to charge VAT, they're no longer exempt, which means they will just start reclaiming the input VAT on everything they buy (they couldn't do this before), at a possible loss to the exchequer.
The only way that would happen is if the amount private schools are spending on products or services with 20% VAT is greater than the amount they are charging in fees. In which case I'm not sure that charging VAT on their fees will make their survival prospects any worse.
I should have been clearer, I didn't mean a net loss to the exchequer, I meant that the gains will not be as large as widely thought. My main point is that playing around with VAT scope and rates will often have unintended consequences.
This article here suggests a better way of achieving the same goal and doesn't involve VAT:
https://www.theguardian.com/commentisfree/article/2024/may/20/vat-privat...
The private schools are an interesting one. From what I'm hearing they are saving money by reducing or even eliminating the subsidised or free places they previously gave to kids from poorer backgrounds. They are also going to stop opening their grounds to local state schools. One work colleague has kids at a private school where they are removing 100 free/subsidised places to help minimise the cost impact on fee paying parents.
Unsurprisingly, private schools are claiming they will have to make these kinds of cuts because that makes a more sympathetic argument against the introduction of VAT than "we don't want rich people to pay a bit more". Time will tell what the reality is.
Read that article with interest but the glaring problem as I see it would be who would be selected for these low-income bursaries? Private and public schools would naturally wish to offer bursaries to the brightest children in order to maintain their USP of achieving better results. If, as the professor suggests, you remove 100,000 of the highest-attaining pupils from the state education system, what does that do to the system they leave behind? High-achieving pupils don't just do well for themselves, they tend to assist in improving the culture within schools and other pupils' aspirations. Taking them out would further damage the state system by saying it's not a place for high achievers, ergo those left behind are pretty much the losers who don't deserve the same standard of education. It would, I fear, be "levelling up" 100,000 pupils whilst knocking down a few million.
As most of the bicycle supply chain is outside of the UK, I don't think that VAT rates will make much difference to them.
In theory, if all the bike shops take the VAT reduction as an excuse to raise prices (like a cartel), then wouldn't that provide an opportunity for at least one of the shops to start undercutting their competitors by lowering their prices? Or have I misunderstood how Capitalists describe how the perfect market works?
It possibly would, although I don't think the price rises would come from the bike shops, it would come from within the distribution, i.e. bike shop margins would stay the same, and the manufacturer & importers would charge more. There could be opportunities for the smaller domestic brands such as Mason, Enigma, Spa, etc to benefit from lower retail prices with lower or no VAT though. Brands with a more global presence such as Specialized, Giant and so on who seem to set their RRP to be broadly the same across regions in closely equivalent USD/EUR/GBP would in my opinion stay the same.
I was reading about that this morning, not only will they be able to claim back VAT on expenditure from now on but also on all capital projects - building, land acquisition etc - they've undertaken in the last decade. This will be of most benefit to the richest, highest-charging schools as they know their parents can afford the hike whilst schools with more modest fees will be using their VAT savings to try and mitigate any fee rises to try to retain pupils. Eton, for example, is passing the full 20% VAT on to parents as a rise in fees, allowing it to use all the VAT it will claim back for the last ten years and in future to add to the foundation's already extraordinary £600M+ assets.One can readily imagine Etonian civil service mandarins, who would of course have spotted the loophole instantly, sniggering to themselves as they promised their new ministers that they would faithfully implement the new policy...
You mean like when the Govt dropped fuel duty but the price of petrol didn't go down?
Exactly...
or beer duty, though its more complex in pubs as inevitably there are concurrent increases in other taxes or expenses, minimum wage increases for example, that mask any discount on the beer sold.
Whilst I agree about zero rating bikes I think the main benefit to the low paid is the salary sacrifice aspect, effectively a year's interest free credit irrespective of tax savings. A simple fix would be to remove the minimum wage barrier.
but the barrier is there because you dont want people to get into situations where theyre earning less than what weve declared is the minimum they should be paid, because theyll likely end up in debt, or unable to pay bills as a result, which is a bad outcome for just letting them buy a bicycle
Cycle to Work is also hellishly complicated: Which scheme provider do you want to use? How do they deal with the application and the money? How do you deal with the application and the money?
I recently got a new bike through a C2W scheme. I work for a small business, so my boss had to actually register with a scheme too (he hadn't had to before, as hadn't used a scheme).
The first scheme he contacted never even got back to him.
The second one did (obviously), but it's complicated: in my case, it was (1) decide which bike to get and from whom, (2) wait for boss to confirm he's registered, (3) get a quote from the bike provider, (4) pay their deposit and their extra 'admin fee' to cover the money they get charged by the C2W scheme provider (fair enough), (5) pass the quote to the C2W scheme provider, (6) pass the C2W scheme invoice to my boss, (7) once that has been paid, notify the bike provider, (8) bike provider gives me a gift card for the money paid, for me to pay their invoice.
I suspect C2W might be easier if it was just one scheme run through the DfT or something…
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