Budget 2013: Fuel duty rise cancelled by chancellor

A rise in fuel duty scheduled for introduction in September has been cancelled, Chancellor George Osborne said in his Budget speech.

Petrol would now be 13 pence per litre cheaper than it would have been had the duty not been frozen over the last two years, he said.

"For a Vauxhall Astra or a Ford Focus, that's £7 less every time you fill up," he said.

The level of the now-scrapped increase had not been announced.

Fuel duty has not gone up since January 2011, when it was raised by 0.76p per litre.

It was then cut by 1p in March 2011 and, ever since, planned increases have been postponed repeatedly.

"We've now frozen fuel duty for two years," Mr Osborne said. "This has not been easy. The government has foregone £6bn in revenues to date."

The Chancellor also announced that he would extend a 100% first year tax allowance for buyers of ultra-low emission vehicles, as well as introduce new company car tax rates for the lowest emitting cars.

"From April 2015, two new company car tax bands will be introduced at 0-50g/km CO2 and 51-75g/km CO2," Mr Osborne said.

Lower takings

Fuel duty has risen from 45.82p per litre in March 2001 to the current 57.95p per litre.

Hence, about 42% of the pump price ends up in the government coffers as duty. This rises to 59% once value added tax (VAT) has been added, according to the RAC Foundation.

As such, petrol and diesel are amongst the main drivers of overall transport costs, according to the Office for National Statistics.

In the 2011-12 financial year, the Treasury received £26.8bn from fuel duty, a near trebling of the £9.63bn fuel duty received in 1990-91.

The fuel duty takings were lower, however, than they were during the previous year, when they peaked at £27.26bn.

This was because 527 million fewer litres of petrol and diesel were sold, as individuals and companies chose to drive less, according to Edmund King, president of the Automobile Association (AA).

'No brainer'

Consumer groups and industry bodies have welcomed the freeze. Both say higher fuel prices have curbed many people's driving and hurt the economy.

"This news provides breathing space for families being smothered by the soaring costs of motoring, especially the 800,000 households spending more than a quarter of their income on operating a vehicle," said Prof Stephen Glaister, director of the RAC Foundation. The AA's Mr King said "76% of AA members are cutting back on journeys, household expenditure or both, due to the high cost of fuel".

However, FairFuelUK spokesman Quentin Wilson said more should be done. "Cancelling a rise that really shouldn't happen is not enough. The government needs to cut duty substantially to get the economic growth we all need."

John Lewis, chief executive of the British Vehicle Rental and Leasing Association, said: "This is almost becoming a no-brainer. With the economy flirting with recession and household incomes still falling in relation to inflation, the government just cannot afford to price businesses and households off the road."

Environmentalists were critical of Mr Osborne's approach.

"The driving force behind rising petrol prices is the soaring cost of oil," said Friends of the Earth economics campaigner David Powell.

"The sensible long-term plan is to protect motorists from rising fuel prices by weaning our transport system off its oil dependency."