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Fuel duty

  • 27 November 2011
  • By admin

Background

Following the decision to abandon the Fuel Duty Escalator in 1999, the Chancellor used fuel duty to moderate fluctuations in world oil prices. When prices were high and volatile, fuel duty was frozen. This approach was discontinued in the 2007 Budget Report. Since then, the government has been happy to apply above-inflation rises to fuel duty in order to reduce headline tax rates.

In Alastair Darling’s 2009 Budget Report, a rolling programme of inflation-linked rises in road fuel duty until April 2010 was announced.

In March 2010 – Darling’s last Budget before the general election - he announced a further three duty rises through to April 2011. The first two did go ahead (1ppl on 1 October 2010 and 0.76ppl on 1 January 2011), but the third, due to be introduced in April 2011, was abandoned by the coalition government after a successful lobbying campaign launched by Peter Carroll called FairFuelUK. In an unexpected turn, Chancellor George Osborne actually cut fuel duty by 1ppl in his March 2011 Budget and postponed the planned duty rise until January 2012.

Current situation

Despite the slight reprieve the Chancellor gave the industry in April, the price of fuel has continued to rise and accounts for at least a third of an operators’ running costs.

Backed by the Freight Transport Association and the Road Haulage Association, the FairFuelUK campaign has continued to lobby hard to push the government to abandon any future duty rises as well as looking at a longer term solution to bring the cost of fuel for commercial vehicle operators in line with the rest of Europe. The UK government levies the highest fuel duty in the European Union.

In recent weeks, FairFuelUK has managed to get the issue of high fuel prices talked about in the largest public arena yet – the House of Commons. A four-hour parliamentary debate on fuel resulted in widespread national media coverage and saw a clear majority of back-bench MPs vote in favour of a motion calling for the government to abandon the planned 3ppl rise due in January 2012.

The Chancellor is expected to announce an abandonment of the January rise when he gives his Autumn Statement to the House on 29 November.

Long-term?

The industry cannot continue to fight every planned future fuel duty rise so a long-term solution remains vital. A fuel duty stabilizer has long been mooted and although the Chancellor introduced a mechanism in his March 2011 Budget, it did not regulate the price at the pump. The industry wants a stabilizing mechanism that keeps the price at the pumps level by reducing fuel tax when the underlining oil price rises and vice versa.

A decoupling of fuel duty for road transport operators whereby trucks are taxed differently to cars is another possible solution.