Cut the 'bloated fat cats' out of Cycle to Work schemes, say independent bike traders

Independent bike shops across the country have continued the call for reform of the Cycle to Work schemes in their current guise, and encouraged the government to help educate large employers on the negative wider social impact some of the schemes on offer have. 

Over the past years, business owners, alongside the Association of Cycle Traders [ACT], have spoken out against the flaws the current schemes have and called on the the government to reform the program, which allows people to save tax on bikes via 'loaning' them from their employers.

Since Labour won the UK general election in July, traders have a renewed hope that the newly formed government will put into action a plan for overhaul at a quicker rate. 

"The changes I’d like to see would be the government taking the lead on this," Gavin Hudson of Butternut Cycles in north London told Cycling Weekly. "I’d like to see a review in order for this to help local businesses in communities that make up individual MP’s constituencies. 

"I’d also like to see more accessibility to the schemes for lower earners. But how we widen access to it without losing the benefits that are there is quite a big conundrum. 

"Finally I’d like to see encouragement for large scale employers to use more than one scheme to enable employees to make an informed decision about picking a scheme that might help support a local business to them."

When initially set up 25 years ago, the aim of the Cycle to Work program was to give employees of enrolled companies tax deductions on bikes and equipment, which are paid through salaries, in a bid to get more people commuting by bike. Customers bought vouchers from Cycle to Work scheme providers, before redeeming them at retailers that had signed up to the scheme. It allows prospective cyclists to save up to 42% on the cost of a full price bike, with payments automatically deducted from their salary. 

The scheme's format has mainly stayed the same ever since, although big retail chains now have their own schemes on offer which see them take a large commission from sales made elsewhere. 

Larger Cycle to Work companies, like Cyclescheme, Cycle Solutions and Halfords Cycle2Work, charge commissions of up to 10%, while others like Gogeta or the Green Commute Initiative (GCI) ask for 3% and 5/6% respectively, and are thus favoured by local bike shops.

Stealing a margin

Another London-based cycle trader, who asked to remain anonymous, echoed Hudson’s view. They said that companies opting to use schemes provided by firms like Halfords were continuing to hurt their business in the long run. 

Halfords Cycle2Work vouchers can be used at independent bike shops as well as at the retail giant itself.

The person in the cycle business said: "It’s the local councils, the hospitals, they’re all on the Halfords scheme… The most galling thing for me about the Halfords scheme is that it’s so successful for Halfords, often because they themselves can’t supply the bike that people want. 

"They’re not [always] fronting any capital, putting a bike in the shop or anything like that to sell that bike. They’re taking a margin from every other bike that they don’t stock in the country, as well as all the other stuff that they do stock."

"But I can’t imagine many big businesses and employers would be interested in hearing that. Using schemes like that works for them and they have no incentive to change."

The same trader added that their biggest gripe with the current setup was simply that the scheme's current form meant that they could easily be legitimately manipulated by high earners while others in low paid jobs are excluded. 

"I’m in a nice neighbourhood in London, and I would say 60 to 70% of our sales go to high-rate taxpayers who are using that tax break to their full advantage to buy a nice bicycle. And I don’t think that was ever the intention of these schemes," they added. "I don’t blame those people at all, as they’re obviously taking advantage of a legitimate scheme that’s out there. 

"But I don’t think the way the schemes are set up are reaching the right people. They’re not getting more people commuting to work by bike. 

"And they are certainly not helping lower income people because they can’t take advantage of these schemes right now. It does have to be that you’re earning well above minimum wage if you want to take advantage of them all right now really… I do think that’s an unintended consequence of all of this, the one who benefits the most is the one who needs the scheme the least."

Cutting out the middle man 

Mark James of the Yorkshire-based JE James chain of cycle shops has been one of the loudest voices to call for change recently. When asked what changes he would like to see Labour make, James said he wanted to cut out the "bloated fat cats" in the middle. 

"What I want to see is the private sector being taken out of the government's job," he said. "Because if the government wants to increase cycling and make it more accessible for everybody then they need to do it directly. 

"All they need to do is provide a code, somebody logs on with their details, national insurance number and everything else and they just do it through the government portal. They do that for other things, so I don’t see a need to reinvent the wheel on this. They do similar for other schemes, so it should be straightforward to put in place."

When contacted by Cycling Weekly, ACT chair Jonathan Harrison said that he was optimistic that plans for change could be actioned quickly under Labour. 

He said: "In terms of the new government coming in, we are hopeful they will be more receptive to what we are trying to achieve and we will be working towards some of the reform steps we outlined previously. Hopefully it could be seen as an easy win for them which helps to meet their green objectives."

Cycling Weekly contacted Halfords for comment in relation to this article but did not receive a response at the time of publication. 

Update: Halfords provided the following comment on 23/08 

"Halfords is one of the largest operators of the cycle to work scheme and last year more than 50,000 people bought a bike through us. Unlike other operators, Halfords does not charge users to own the bike at the end of the hire scheme, meaning employees can benefit from the full savings available," a spokesperson said. 

"We want to give customers choice; that’s why we’re pleased to partner with independent bike shops up and down the country, meaning that people can redeem their Halfords Cycle2Work vouchers at Halfords stores and over 1000 independent retailers.

"We employ a large team to administer Cycle2Work, support employees through the application process, and market the scheme actively to employers – growing the overall market for bikes, accessories, and servicing. We run numerous roadshows designed to encourage employers and their people to take advantage of the scheme, so reducing emissions, easing congestion, and improving health.

"The commission we charge independent bike shops covers the investment in administration, technology infrastructure and marketing, generating business for all our retail partners. Halfords also maintains relevant regulatory permissions which means we are able to administer transactions on bikes worth over £1,000. Again, this works to the benefit of our partner independent bike shops."