UK fuel duty frozen

London, UK: The government will not impose a three pence per litre rise in fuel duty in August and fuel duty will be frozen for the rest of the year, the Chancellor told MPs, today.

The announcement made by the chancellor George Osborne followed the news that the Labour Party had threatened to force a House of Commons vote on the issue as they joined the call for all MPs to unite in the scrapping of the planned August 3p fuel duty hike.

The move follows a campaign by road users’ groups, which argued that the rise, announced in the budget, would damage the economy.  James Hookham, managing director – policy and communications, Freight Transport Association said:

“The chancellor’s decision is absolutely right for the economy and removes that extra cost for commercial vehicle operators that would have hit them hard this summer.

“The government needs to engage in a national debate about the role of fuel taxation in the economy and we urge the chancellor to seize this opportunity.”

Dr Neil Bentley, CBI deputy director-general, said: “This decision will be welcomed by hard-pressed families and businesses across the country. A fuel duty freeze will help to support road hauliers and freight transport operators, making delivering our goods that bit more affordable, and supporting the economy during the challenging months ahead.”

Aldermore, a British  bank, says UK haulage firms still need fuel price parity with European countries if they are to successfully fight-off foreign competition.  Damon Walford, managing director, Aldermore Invoice Finance, said: “The UK haulage industry remains at a significant disadvantage against European competitors, who pay as little as 106p per litre for diesel in Spain, 111p in Austria and just 96p in Luxemburg. Even in Germany and France, diesel prices are significantly lower at 115p and 118p respectively.

“From 1 January 2013, assuming the 3p price rise still goes ahead, a litre of diesel selling for approximately 145p at the pumps will cost just 59p to produce and 5p to deliver and sell. The remainder – a whopping 81p per litre – will consist of fuel duty and VAT. The government therefore has plenty of scope to harmonise UK diesel prices with the rest of Europe.”

Walford says: “The cost to the government of reducing fuel duty is not as high as it may at first appear. For example, the Centre for Economics and Business Research has recently** produced a report on behalf of Fair Fuel UK, which shows that a reduction in fuel duty would actually help stimulate economic recovery. According to the research, a 2.5p per litre cut in fuel duty would result in the creation of 175,000 jobs within a year and would boost UK GDP by 0.32%, resulting in no fiscal loss to the government.