A rise in fuel duty due to be introduced in September, has been cancelled by the Chancellor.
In his Budget speech yesterday, George Osborne said petrol would now be 13 pence per litre cheaper than it would have been had the fuel duty not been frozen in the last two years. He said: “For a Vauxhall Astra or a Ford Focus that’s £7 less every time you fill up.”
Fuel duty was raised by 0.76p per litre in January 2011 and hasn’t increased since. It was then cut by 1p in March 2011 and planned increases ever since have been postponed repeatedly.
The Chancellor added: “We inherited a fuel duty escalator that would have seen above inflation increases in every year of this Parliament. We abolished the escalator and we’ve now frozen fuel duty for two years. This has not been easy. The Government has forgone £6 billion in revenues to date.”
Motoring organisations welcomed the freeze.
Edmund King, AA President said: “A September fuel duty hike would have been the last straw likely to break UK drivers’ budgets and would have led to a summer of discontent. Scrapping the fuel duty hike is a pragmatic move and will bring some relief at the pumps.
“With current fuel prices at 138.42 for petrol and 145.24 for diesel, drivers will welcome the scrapping of the fuel duty hike with relief rather than with joy. Prices are almost 5p a litre higher than when the Chancellor froze fuel duty in March 2011.”
Professor Stephen Glaister, Director of the RAC Foundation added: “This news provides breathing space for families being smothered by the soaring costs of motoring, especially the 800,000 households spending more than a quarter of their income on operating a vehicle.
“Through this move the Chancellor will lose about £1 billion a year in duty and VAT income but tens of thousands of people will be saved from being forced to give up their cars against a backdrop of generally rising running costs.”
Environmental groups were, however, critical of the announcement. Friends of the Earth Economics Campaigner David Powell said: “The Chancellor’s refusal to raise fuel duty in line with inflation has deprived Treasury coffers of £5 billion in the last two years, leaving other parts of the economy to pay the price. The driving force behind rising petrol prices is the soaring cost of oil – the sensible long-term plan is to protect motorists from rising fuel prices by weaning our transport system off its oil dependency.”