Chancellor George Osborne urged not to hike fuel duty in 2016 Budget

14th March 2016

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With the vast majority of motorists, at 84%, believing the tax burden on fuel is already too high the RAC is calling on the Chancellor to not introduce any further hikes in the Budget this week.

A survey from the group found that 80% want to see George Osborne cut duty or at least continue the freeze he has maintained since cutting the rate by a penny in the 2011 Budget.

More than a quarter, at 26%, of the motorists questioned by the RAC would like to see duty kept at 57.95p a litre for the rest of the Parliament whereas 18% would be happy with the freeze to be extended by another year on 16 March.

However, more than a third, at 36%, want Osborne to cut duty by a penny or more.

Since autumn 2014 when petrol was 129p a litre and diesel was 133p, pump prices have fallen to around £1 a litre for both fuels as a result of the plummeting cost of a barrel of oil.

Consequently, with forecourt prices now as cheap as they were in 2009, 80% of motorists said they have benefitted from reduced car running costs and nearly half, at 46%, said they have more disposable income.

This is something the RAC is keen to remind the Chancellor of ahead of the Budget as the Treasury’s own analysis has demonstrated that an increase in fuel duty has a negative impact on economic growth.

Unfortunately, even without a duty rise, motorists might be about to experience the first significant rise in average fuel prices in eight months as the oil price is close to going back above the $40 mark for the first time since 4 December 2015.

Combined with a weaker pound, this is likely to lead to a rise in pump prices of around 3p a litre. If this were to be coupled with a duty rise in the Budget, motorists could face a dreaded ‘double whammy’ pump price rise at the beginning of April.

Some 68% of the motorists polled by the RAC said their driving and lifestyles would be negatively impacted by a duty rise, with half, at 49%, fearing the increased costs would lead to them spending less on other items and almost a quarter, at 23%, said they would probably drive less.

Currently, HMRC figures show that the Government collected £26.7bn from the 46.2bn litres of fuel sold in 2015. This revenue figure has remained constant as the number of cars has increased from 28.4m in 2010 to over 30m in 2015 due to the average fuel efficiency of new cars leaving the showroom improving year-on-year over the same period

RAC fuel spokesman Simon Williams said it is clear that “any increase will go down like a lead balloon with motorists”.

He added: “The feeling we are getting from motorists could not be clearer: they do not want to see the Chancellor announce a fuel duty rise in his Budget speech this Wednesday. There is widespread consensus that lower fuel prices have left people with more money to spend elsewhere, which both government and independent analysis shows is good for the economy.

“We strongly urge Mr Osborne not to go down this route. As a tax, fuel duty is well past its ‘sell by date’ – a fact clearly demonstrated by the underlying year-on year decline in revenue as vehicles become more fuel-efficient and ultra-low carbon vehicles become the norm.”

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