Fuel duty
freeze & cut extended
In the Chancellor's Spring Budget statement yesterday, Jeremy
Hunt provided a benefit for motorists and a bid to ease the
cost of living pressures by maintaining both the 5p cut on fuel
duty and the freeze on fuel duty for another 12 months. It's
the 14th consecutive year fuel duty has not been increased.
Fuel
duty is charged at 52.95p a litre plus VAT, an amount that was
cut by 5p in 2022 by the then chancellor Rishi Sunak because
of the cost of living pressures from rising motor fuel prices
caused by Russia's invasion of Ukraine and the consequential
disruption in the oil markets. Hunt said on 6th March 2024 the
measures included in the Spring Budget 2024 would save motorists
an average of £50 over the next year and would bring the
total savings since the 5p cut was introduced in 2022 to £250.
See
GOV.UK webpage
According
to the AA petrol is up 15% at 145p a litre compared with an
average of 123p between 2017 and 2019. That increase has contributed
to the rise if the cost of living in the UK and because motor
fuels are used in many sectors of the economy, not least the
distribution of goods and materials and passenger transport,
there is a "multiplier effect" as businesses have
to pass on those costs in their prices and service charges.
So the 14 years of the fuel duty freeze and the 5p cuts have
made a major contribution to avoiding even higher cost of living
increases. The Office for Budget Responsibility, the independent
fiscal watchdog, commented that continued freezing of fuel duty
would cost the Treasury more than £8 billion by the end
of the decade.
The trade
body representing car makers, the Society of Motor Manufacturers
and Traders, said there was little in the Chancellor's statement
to help consumer demand for switching to electric vehicles.
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General description of the measure
This
measure extends the temporary cut in the rates of fuel duty
introduced at Spring Statement in March 2022, and extended at
Spring Budget in March 2023, for a further 12 months. The assumed
inflation increase in fuel duty in 2024 to 2025 will not take
place. Taken together this will maintain fuel duty rates at
current levels for another year and represents a reduction of
around 7 pence per litre (ppl) for main petrol and diesel rates
in comparison to previous plans.
This
will maintain the cut in the rates for heavy oil (diesel and
kerosene), unleaded petrol, and light oil of 5ppl, and the proportionate
percentage cut (equivalent to 5ppl from the main fuel duty rate
of 57.95ppl) in the rates for other fuels and rebated fuels,
where practical. The current and previous fuel duty rates are
shown in the following table:
Background to the measure
Fuel
duty is payable on petrol, diesel and other liquid fuels used
in vehicles, machinery, and for heating. It is also payable
on gases used as fuel for road vehicles, but otherwise excludes
gas, electricity and solid fuels such as coal which are subject
instead to the climate change levy.
At the Spring Statement 2022, the Government announced that
rates of fuel duty would be reduced for 12 months to support
households and businesses at a time of high oil prices. This
included cutting rates for heavy oil (diesel and kerosene),
unleaded petrol, and light oil by 5ppl, with a proportionate
percentage cut (equivalent to 5ppl from the main fuel duty rate
of 57.95ppl) to the rates for other fuels and rebated fuels,
where practical. This was extended for a further 12 months at
Spring Budget 2023. This cut is currently legislated to end
at the end of 22 March 2024.
Link
to GOV.UK webpage |
