Driving Spirit

Stepping Off The Fuel Duty Escalator

So we’ve just had the 2011 Budget and … I can’t believe I’m typing this … it’s good news for motorists. The headline is that fuel duty is down … but not by much.

George Osborne was under growing pressure to do something to bring fuel prices under control, and he’s done a little bit more than expected. To start with, next month’s fuel duty increase is shelved until 2012. That would have added around 5p to a litre of go-go juice so we’re already saving a bit at the pumps, but on top of that from 18:00 this evening the duty will be slashed by an amazing 1p. Yes, that’s right, one whole penny per litre. Don’t forget that we’ll also be saving the VAT on that penny so the actual saving is 1.2 pence per litre. Oh happy days!

Mr.Osborne also boldly declared that the fuel escalator, where fuel duty rises at 1 pence above inflation each year, has been scrapped. Well, at least until 2015. So that’s not really scrapped then, more like ‘put on hold’. We’ll see what happens to it in 2015.

Then there’s the new fuel duty stabiliser. This is the clever part of the budget, the idea being that the tax on fuel company profits is increased and fuel duty decreased when fuel prices are high. The thinking here is simple – oil companies are raking in loads of extra profit so can afford to shoulder the burden of taxation, allowing motorists to benefit from reduced fuel duty. When oil prices go down the fuel duty goes up and oil company profits are protected by their tax levels being reduced.

If predictions are correct then this could see prices drop back down to around 115p per litre. Now that’s not exactly cheap, but it’s better than the state we’re in at the moment. But can Osborne’s Big Idea really influence the oil prices enough to make that much of a difference? Only time and the pump prices will tell.

The Labour opposition are, of course, claiming that more could have been done. But their ‘big idea’ was to introduce a lower rate of VAT on fuel, but that was a non-starter because it would be illegal under EU regulations. And seeing as they were so anti-motorist when they were in power they have zero credibility in my eyes.

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