Fuel duty bombshell

London, UK: There are calls for the chancellor to commit to a further freeze of fuel duty after a forecast from the Office for Budget Responsibility said 12p a litre would be added to pump prices if the government did not act.

Fuel duty was not mentioned by Chancellor Jeremy Hunt in his autumn statement earlier, but the fiscal watchdog’s document says it assumes there will be an increase in the spring. The “planned 23% increase” would likely see the price of petrol and diesel rise by around 12p a litre, the OBR said, boosting government coffers by £5.7bn.

It would be the first time a government has raised fuel duty in cash terms since January 2011. Fuel duty has been frozen at 52.95p a litre since 2011 and it was cut by 5p a litre in the spring statement last year, a measure due to expire at the end of March.

A Treasury spokesperson said: “The 23% figure came from the OBR, not the Treasury. It is based on forecasts that are subject to change. We have not announced anything on fuel duty today – the existing 5p cut will remain in place until March 2023 (a tax cut which is worth £2.4bn), and final decisions on fuel duty rates will be made at the spring budget.”

Logistic UK hit out at a proposed 23% increase saying it would be a “body blow to the logistics industry” if introduced. David Wells chief executive, Logistics is alarmed that a proposal of such significance was not discussed in the Chancellor’s fiscal statement made in the House of Commons earlier, and is concerned about the potential impact of its introduction.

“Logistics is at the heart of all economic activity in this country, and relies on fuel to facilitate its work, whatever the mode of transport used. Bulk diesel prices have increased by 30% since January.  With businesses already under financial pressure, and operating on very narrow margins, a duty hike of this magnitude would have significant impacts, for operating costs and, ultimately, on inflation.  

“Although outlined in the spring financial statement, the fact that the detail of this policy was hidden in the body of the OBR Report and not announced by the chancellor in the House earlier indicates that the government was hoping to avoid scrutiny on the topic.

“We are seeking urgent clarification as to whether the duty rise will be implemented as planned, as a rise of this magnitude would have a detrimental effect on the UK’s economy, stifling activity and placing unnecessary pressure on a sector deemed ‘essential’ only a year ago, he said.

The proposed rise in fuel duty would equate to an additional £4,850 for the cost of running a 44t truck, according to Logistics UK’s calculations, bringing fuel duty costs to a total of £26,246 per vehicle, before the cost of fuel itself. Logistics UK estimates that a small haulage firm with seven HGVs (98% of logistics businesses are SMEs) would have £34,000 pa added to annual operating costs if the duty rise were to be introduced after March 2023. 

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