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Chancellor cancels January fuel duty rise

29 November, 2011

January's planned fuel duty rise will be cancelled, Chancellor George Osborne announced in today's Autumn Statement.

The increase would have raised prices at the pump by 4ppl within days, following the scheduled increase on January 1,2012.

"Based on current average UK pricing this would have pushed diesel to a new record high at over 145ppl and this grade is steadily gaining market share at the expense of petrol," said Brian Madderson, RMI Petrol Chairman. "The Chancellor has made the right decision, and we are delighted.

"But even with this standstill, the UK still levies the highest duty on diesel in the European Union (EU). Duty needs to be cut by 26ppl to achieve parity with the average diesel rates across the EU. Foreign HGVs and other diesel-powered vehicles are still entering the UK with full tanks up to 1500 litre capacity. We estimate this duty disparity loses HM Treasury at least £1.2bn/year in fuel tax, as well as continuing to threaten small/medium size hauliers. This needs to be urgently addressed by Government."

Madderson continued: “While an easy option for the Treasury, fuel tax unfairly penalises the low-income earners, single families and rural communities that often have poor public transport alternatives. There is evidence that driving habits are changing as consumers struggle to balance their household budgets.”

Retail fuel sold has dropped by over 4bn litres in the past four years mainly as a direct result of higher pump prices with the net duty increase of 7.60ppl and change from 15% to 20% VAT.

With both oil companies and hypermarkets fighting for share of a declining market, the independent forecourt retailers have been caught in the cross-fire with many closing for business. Overall, the UK has been losing an average 400 petrol filling stations every year in the past 10 years, justifying the recent claim by Palmer & Harvey that 'fuel deserts', both urban and rural, are rapidly emerging to the detriment of the consumer. There are now less than 8,750 sites.

Madderson continued “RMI Petrol will continue to lobby Government and their officials to defer the duty increase still planned for 1 August next year. With RPI inflation indexing and 20% VAT the retail price impact could be 4.00ppl at the pump, which we argue is too much and too early in the cyclical recovery of the economy.”