/ Money, Motoring

Fuel duty price hike postponed, but for how long?

It has been widely reported that the government is ‘scrapping’ the planned 3p per litre increase in fuel duty, due to be introduced in August. But it might not be the u-turn it’s purported to be.

With the words ‘scrapped’ and ‘u-turn’ plastered online and in newspapers today, you’d be forgiven for thinking that the Chancellor, George Osborne, has put off the 3p fuel duty rise for good. If the headlines were true, it would no doubt help keep motorists moving, and would keep some campaigning groups happy.

And the potential of injecting that lost tax revenue back into the economy seems, on the face of it, pretty positive. There’s little doubt the economy could do with stimulating, to try and move it out of recession and into growth. But in stimulus terms is it really that significant?

Steering clear from the word ‘scrapped’

The headlines will no doubt generate pleasure for those who’ve been pushing for change and believe this is the result of their persuasive efforts, and derision from those who believe it’s just another u-turn.

However, when you look beyond the headlines, you’ll see that the Chancellor hasn’t actually ‘scrapped’ the fuel duty rise. He has simply put the decision off until (at least) the end of the year. Motorists may be penalised after all, but simply not for an extra four months or so.

Put in those terms, it sounds far less positive in my view. In the short term, those living with reduced bus services (I know my local authority and many others have reduced or removed transport subsidies over recent years) and people living in rural areas, where the car is often the only viable transport option, will be relieved. I guess this is akin to the relief we’re all feeling from petrol prices dropping over recent weeks.

Of course, the question of how the Chancellor plans to plug that gap in revenue (said to be around half a billion pounds) still hasn’t been addressed. But are we to expect the price hike to come into affect in 2013? If so, what do you think about that possibility?

Perhaps you think the shortfall in government revenue should come from other areas, such as motorway toll roads or more congestion charges in major cities?

Comments
Profile photo of dean
Member

Why does fuel duty keep having to go up like this though? Are we using less? are we driving slower and not generating enough money for the government?

So as usual, it’s the person on the street that has to fund the governments/banks/directors incompetence. Really nice of him to “put it off”, shows he’s really in touch with the person in the street.

Profile photo of richard
Member

Shows the “government” is running scared – nothing to do with being in touch – Osbourne has made so many mistakes – it is likely to lead to civil unrest unless he starts to “listen” – remember most cuts haven’t started to bite yet.

Profile photo of ChrisGloucester
Member

“Of course, the question of how the Chancellor plans to plug that gap in revenue (said to be around half a billion pounds) still hasn’t been addressed.”

Well, it’s about balance and choice isn’t it.
To mug people for 85p fuel tax plus VAT (tax on tax) is morally wrong in my book. It’s not based on the ability to pay and it’s not as if most of us have any choice in the matter is it?
How about hitting the people who got us into this mess a little harder?
How about higher rates of tax for the rich? I’d be happy to have an income which resulted in me paying 50% even 75% income tax because in getting there I’d be living very comfortably thank you very much.
No rather than that we have a system whereby it’s quite possible for a rich (and greedy) CEO to pay less tax than the worker on minimum wage who cleans his office.
That’s where the revenue shortfall (and more) gets made up.

Also, even if the normal rate of income tax were increased by a penny or so fuel tax levels could reduce, the economy would get a bit of a kickstart and revenue collected is at least more fairly based on the ability to pay it.
Consumption tax is only fair if that particular factor of consumption is optional. Without a viable alternative, and for most there isn’t one, fuel tax is not optional.

Member
Snowdin says:
2 July 2012

I think the Government will make a profit out of postponing the petrol price. Remember that 2012 is the year when the post war baby boomers hit 65, and the increased number of surviving men start to get their State Pensions. A 3p rise in petrol prices would surely cause a small rise in the September CPI result. September CPI governs the 2013 rise in State pensions, all public service pensions, a variety of state benefits and the indexation of tax allowances for the 2013 Budget. A small rise in CPI on a massive element of public spending is probably far more significant than putting off increased petrol receipts for a few months, especially as a price increase causes a slight reduction in petrol useage, what the OBR calls a “post behavioural cost.” If that hypothesis is correct, then pensions, benefits etc will not rise to correct for the coming petrol price rise, at least not next year, and guess who will be funding the alleged “shortfall in government revenues?”