Chancellor Rachel Reeves is reportedly planning to announce the end of a temporary 5p cut in fuel duty in the upcoming Budget, as sources briefed on her thinking have revealed. This change is anticipated to come into effect from next year, along with a proposed cessation of a 13-year freeze on fuel duty as urged by the Treasury department.
With an aim to address a significant £22 billion deficit in public spending declared in July, the Campaign for Better Transport has estimated that scrapping the 5p cut and reintroducing annual inflation-linked increases could potentially generate £4.2 billion in revenue for the Treasury. However, motoring groups have raised concerns about the impact of such a decision, warning that it could be “catastrophic for many”. In a show of opposition, over 70 Conservative MPs have penned a letter to the chancellor, expressing fears that any rise in fuel duty may hinder economic growth and result in an additional £160 burden on families in terms of annual fuel costs, as per reports from The Sun.
Initially introduced in 2022 amidst soaring energy prices triggered by Russia’s invasion of Ukraine, the fuel duty cut has been sustained by successive chancellors since then. Currently set at 52.95p per litre for petrol and diesel, the duty is meant to increase annually in line with inflation, but it has essentially remained frozen since 2011 in efforts to win favour with drivers. The cancellation of the scheduled fuel duty rise in the previous Conservative government’s March budget reportedly incurred a £3 billion cost for the fiscal year 2024/25.
Responding to the speculations, the Road Haulage Association (RHA) has called for the freeze to be maintained, highlighting the challenges faced by businesses dealing with tight profit margins. Richard Smith, managing director of the RHA, emphasised the potentially catastrophic impact a fuel duty rise could have on small and medium enterprises across Britain. At this stage, a Treasury spokesperson has refrained from commenting specifically on any potential tax changes outside of formal fiscal events.
As controversy simmers over the looming decision regarding fuel duty, stakeholders from various sectors brace for potential ramifications of the chancellor’s awaited announcement in the forthcoming Budget discussion.