Motoring groups today praised Rishi Sunak‘s announcement that the planned fuel duty rise will be cancelled, describing it as ‘some relief for hard pressed drivers’.
But the Chancellor’s decision to keep it frozen at 57.95p a litre for petrol and diesel, as it has been for the last 11 years, comes as prices continue to hit record highs.
Yesterday, petrol hit a new record high of 143.48p per litre, with diesel at 146.89p – far above pre-Covid levels of 122p for petrol and 125p for diesel, which were falling.
The 21p difference on petrol includes 3.5p extra in VAT, which is more than the 2.84p scheduled increase in fuel duty – so Mr Sunak is still taking more tax from drivers.
He put the levy on hold for the 12th year running in the Budget after intense lobbying by Conservative MPs, despite Boris Johnson scrambling to get world leaders to commit to climate change targets at the Cop26 summit in Glasgow next week.
An AA graphic shows petrol hit a new record high of 143.48p per litre yesterday, with diesel at 146.89p – far above pre-Covid levels of 122p for petrol and 125p for diesel, which were falling
A sign outside a BP petrol station in the Surrey village of Lower Kingswood is seen yesterday
RAC data show the price of unleaded has rocketed by 28p a litre in a year from 114.5p in October 2020, adding £15 to the cost of filling up a family car.
Today, Mr Sunak told MPs: ‘With fuel prices at the highest level in eight years, I’m not prepared to add to the squeeze on families and small businesses.
‘So I can confirm today the planned rise in fuel duty will be cancelled. That’s a saving over the next five years of nearly £8billion.’
Reacting to the news, Howard Cox, founder of the campaign FairFuelUK, told MailOnline: ‘FairFuelUK warmly welcomes freezing fuel duty for the 12th year.
Chancellor Rishi Sunak holds the Budget Box as he leaves 11 Downing Street in London today
Drivers queue outside an Esso petrol station in Ashford, Kent, amid panic buying on October 1
‘FairFuelUK unashamedly takes some of the campaigning credit for the longest period of any UK excise levy being capped. This is great news and some relief for hard pressed drivers.’
AT A GLANCE: KEY POINTS FROM BUDGET
Here are the main points from Chancellor Rishi Sunak’s Budget:
- The Budget is focused on the ‘post-Covid’ era, according to the Chancellor, and will pave the way for the ‘Prime Minister’s economy of higher wages, higher skills, and rising productivity’.
- Independent forecaster the Office for Budget Responsibility (OBR) has scaled down its assumption of the scarring effect of Covid-19 on the economy from 3% to 2%, Mr Sunak told the Commons.
- The OBR has downgraded its unemployment forecast due to the coronavirus pandemic from 12% down to 5.2%, the Chancellor told MPs.
- The minimum wage will increase to to £9.50 an hour next year, up from the current £8.91.
- The Universal Credit taper rate will be cut by 8% from no later than December 1, bringing it down from 63% to 55%.
- Alcohol duty is being ‘radically’ simplified by introducing a system designed around the principle of ‘the stronger the drink, the higher the rate’.
- A ‘draught relief’ will apply a lower rate of duty on draught beer and cider, cutting the tax by 5% on drinks served from draught containers over 40 litres and bringing the price of a pint down by 3p.
- A planned rise in fuel duty will be cancelled because of pump prices being at their highest level in eight years.
- Flights between airports in England, Scotland, Wales and Northern Ireland will be subject to a new lower rate of Air Passenger Duty from April 2023.
- Every Whitehall department will receive a ‘real terms rise in overall spending’ as part of the Spending Review, the Chancellor said, amounting to £150 billion over this Parliament.
- Mr Sunak confirmed a levy will be placed on property developers with profits over £25 million at a rate of 4% to help create a £5 billion fund to remove unsafe cladding.
- Devolved administrations will be given the ‘largest block grants’ since 1998, with an increase to Scottish Government funding in each year by an average of £4.6 billion, £2.5 billion for the Welsh Government, and £1.6 billion for the Northern Ireland Executive.
- An extra £2.2 billion has been announced for courts, prisons and probation services, including £500,000 to reduce the courts backlogs.
- £300 million will go towards ‘A Start for Life’ parenting programmes, with an extra £170 million by 2024/25 going into paying for childcare.
- The Chancellor said core science funding will rise to £5.9 billion a year by 2024-25, a cash increase of 37%.
- A new 50% business rates discount will apply in the retail, hospitality, and leisure sectors, with eligible businesses able to claim a discount on their bills of up to a maximum of £110,000.
- Ahead of the Budget statement, £7 billion transport funding was announced for areas including Greater Manchester, the West Midlands and South Yorkshire for projects ranging from tram improvements to introducing London-style improvements in infrastructure, but only £1.5 billion of this was believed to be ‘new’ funding.
- A £6 billion package of funding will help tackle NHS backlogs and invest in technology was also trailed ahead of the statement.
However, he added that it was an ‘opportunity missed’ too, saying: ‘With pump prices at their highest ever, meaning the Treasury is wallowing in a £1billion unexpected windfall, it was a time for the Government to have cut fuel duty significantly.
‘It was a time too, to incentivise drivers to move to cleaner fuels and put a moratorium on the unpopular 2030 ban on new diesel and petrol car sales, until more cleaner fuel technologies come forward.
‘For these reasons, it is imperative to take these points on board: UK drivers still remain one of world’s top 3 nations’ highest taxed motorists, face an uncontrolled pump pricing lottery, congestion, and clean air charges plus a perpetual demonisation for all the environmental ills of our planet.’
Prices at the petrol pumps previously reached an all-time high on Sunday, when 142.94p a litre was recorded, beating the former record, set in April 2012, by 0.46p.
The data is calculated by Experian Catalist and provided to the RAC and AA.
AA president Edmund King told MailOnline today: ‘Most drivers will be relieved that duty hasn’t been increased especially with record prices at the pumps. This is a pragmatic approach by the Chancellor.
‘This will bring some ‘pump relief’ but the pain of record petrol prices remains. ‘Our research suggests that when fuel prices are high, lower income drivers cut back on general household expenditure, including food and heating, to keep their cars on the road. Freezing duty will help these drivers.
‘We will though be looking for more fiscal and infrastructure incentives to support our COP26 positioning to ensure that the UK ‘gets electric done’ as soon as possible. Fleets and company car drivers have a vital role as their new EVs soon find their way onto the used car market.
‘The AA welcomes extra funding to improve lorry park facilities as a partial move to attract more HGV drivers and improve efficiency of the road network. Funds to fill one million potholes will be welcomed by those on two wheels and four wheels to cut deaths, improve safety and reduce vehicle damage.’
The latest figures are a major rise from the early days of the pandemic when the price of petrol collapsed to a low of 106.48p in May 2020.
The rebound is much quicker than the two-and-a-half years it took for prices to recover after the 2008 financial crash, the AA said.
RAC fuel spokesman Simon Williams told MailOnline today: ‘We welcome the Chancellor’s confirmation that duty will continue to remain frozen at 57.95p a litre. With pump prices at record highs, now would have been the worst possible time to change tack and hike up costs still further at the forecourt.
‘If duty had gone up, RAC data suggests the average price of a litre of petrol could have reached 147p taking the cost of a tank to over £80, and diesel an eye-watering 150p.
‘But we’re disappointed he did not provide some respite for drivers at the pumps.
‘As VAT is charged on the final cost at the pumps, a temporary cut in VAT to motor fuels would have benefitted drivers immediately at time when filling up the car is hurting household budgets more than ever before as well as the wider economy as people will have less money to spend.’
Oil prices have soared since the beginning of the year from around $50 per barrel in January to $85 today.
In 2012, when the last record was set, the price of a barrel of oil had reached $117.
But the exchange rate between the pound and the dollar is now lower.
Meanwhile, the price of ethanol, which is mixed into the UK’s petrol, has soared by 80 per cent since 2012, the RAC said.
The price rises on Sunday came on the weekend before 300,000 people in London’s new Ultra Low Emission Zone face a charge of £12.50 every day because their cars are old and emit too much carbon.