It’s official: fuel duty cuts do stimulate the economy after all

Commercial Motor
April 18, 2014

The government has admitted that reducing fuel duty does lead to a boost in economic growth.

In a report released this week (Analysis of the Dynamic Effects of Fuel Duty Reductions) the Treasury revealed that by abolishing the planned fuel duty escalator rise in the 2011 Budget, and instead cutting duty by 1ppl and subsequently freezing this rate, the following benefits have been realised:

  • Fuel duty in this parliament has fallen by 13% in real terms, as opposed to rising 7% if the fuel duty escalator had been in place (pump prices are now 16ppl lower than if duty had increased with inflation, rising to 20ppl lower by the end of this parliament);
  • GDP will rise by 0.3% to 0.5% in the long term – an economic boost of between £4.5bn and £7.5bn.

The FairFuelUK (FFUK) campaign and its backers, including the Road Haulage Association (RHA) and the Freight Transport Association (FTA), welcomed the research, which validates their own on the subject, the most recent of which was conducted by the National Institute of Economic and Social Research.

Jack Semple, RHA director of policy, said: “The important thing to ensure now is that this economic and tax reality becomes embedded as core Treasury and political thinking as we look ahead to the next parliament.”

The FTA estimates that every additional penny of fuel duty costs operators collectively an extra £116m a year.

FTA chief executive Theo de Pencier said: “It does appear as though the chancellor has caught up with our findings, and there is now every chance for him to go further and boost growth by cutting 3ppl from current rates.”

FFUK campaign head Howard Cox praised the efforts of the pressure group’s 500,000 supporters during the past
three years.

“What we now want is an official recognition from the government that cancelling the fuel duty rise to help the economy was indeed our idea, and that FairFuelUK and its supporters were the main force that drove this critical policy change,” Cox said.

About the Author


Commercial Motor is the online presence for Commercial Motor magazine, the world’s oldest magazine dedicated to the commercial vehicle industry.

Share this article

Vehicle Type