/ Money, Motoring

Budget 2011: Not such good news for drivers?

Mini with UK flag

The weight of public opinion meant that George Osborne was virtually compelled to cut fuel duty in yesterday’s Budget. But the reality is that motorists are unlikely to feel better off this year.

On the face of it, the 1p-a-litre cut in fuel duty in this year’s Budget was good news for motorists – some relief from current record prices at the pump.

Better news still was the Chancellor’s decision to scrap the 1p-a-litre duty escalator and delay April’s inflationary rise on fuel duty.

All told, if this had gone ahead, with VAT added this would have amounted to about 5p-a-litre. So, as George pointed out, we’re actually going to save (a theoretical) 6p-a-litre when filling up.

It’s a welcome gesture, but the price of diesel at my local garage jumped a staggering 4p-a-litre overnight the other week. And, lest we forget, the Chancellor also put fuel up by 3p-a-litre in January. So I can’t see many motorists feeling better off.

Not a fuel duty stabiliser

There was a lot of talk about the new Fair Fuel Stabiliser. Essentially, this means scrapping the fuel duty escalator (which adds 1p to a litre on top of inflation each April), reducing duty by 1p, and taxing North Sea Oil companies harder while the price of oil remains high.

When (or more pertinently, if) the price of oil comes down to around $75 a barrel, oil company taxes will fall, and the government will re-introduce the fuel duty escalator for drivers.

But this is a far cry from the fuel duty stabiliser promised by the Tories in their election manifesto. That proposed keeping the price of fuel broadly static at the pump (within 5p-a-litre either way) with duty levels flexing as the price of oil rose or fell. That would have pleased a lot of drivers, but has obviously proved too complex to introduce.

By contrast, the measures in yesterday’s Budget offer drivers no protection against rising oil prices. As George Osborne himself said on BBC Breakfast today, ‘I can only control the duty on fuel, not global oil prices.’ The reality, given the situation in Libya and current levels of oil speculation on the markets, is that our 1p (or even 6p) relief at the pump will be wiped out within a week or two.

Car tax is rising

On top of that, most of us will have to pay more for a tax disc from April onwards. The prices for most mainstream cars will rise between £5 and £10 a year (due to inflation).

Of course, it would be churlish to expect big handouts from a government trying to steer a path through an economic disaster zone. But let’s not have the wool pulled over our eyes. Motorists are still just as vulnerable to rising oil prices as we were before, and there’s little chance of them falling soon.

My advice is to fill up now at your cheapest local forecourt (I tend to use petrolprices.com to find the cheapest fuel) and then hope for the best. That, I suspect, is exactly what Mr Osborne is doing. Do you think the Budget did enough for motorists? How will it affect you and your driving habits?


I think the Chancellor struck a reasonable balance with the changes made to duty. If he had done nothing, next week we would be paying another 6p a litre. That’s near £75 a year for the average motorist and a huge sum for transport firms.

We currently have high unemployment, high imported inflation and a huge national debt. There really isn’t much room for manoeuvre until those three factors are reduced.

N Dias says:
24 March 2011

There may be many things that the chancellor has struck but, the words reasonable and fair when considering the 1p per Ltr reduction cannot possibly be used in the same sentence as fuel duty. Especialy when considering we pay 2 taxes on road fuel. There can be hardly anyone hit so hard by taxes as the motorist ; duty and vat on fuel, tax on car insurance and road tax. Remember that part of the reason given for higher fuel prices is ‘inflation’ and when the cost of fuel goes up, so does everything transported by road which leads to “INFLATION” !!!!!!!!

Pauly says:
24 March 2011

Had the Chancellor done nothing to fuel in the budget, there would have been calls for cuts. The fact that there has been cuts shows that whatever he does people will call for more. Had he reduced it even further, people would still want more. This Government came into power with a huge national debt caused by the generosity of the previous government. This caused people to expect a higher standard of living and they will not go back to their previous standards. The fuel rises are in part due to the situation in Libya. Perhaps the fuel protesters should go there and do their protesting!

It’s all hot air.

The oil companies will increase prices to cover the charge on them. This will be passed on to the motorist and the Government will receive more fuel duty. Net effect is we still pay the same for fuel and the fools who listen only to the sound bites are taken in.

martin says:
24 March 2011

George Osbourne is an immature chancellor who is spinning us a yarn and distorting the effects of the Budget on the majority of ordinary people in Britain from a Government with a hidden agenda who are taking advantage of the situation in the sham of saving the Country in too short a timescale whilst blaming the previous government for all his inadequencies.

Agreed – He was also not man enough to announce during the budget speech that he was REDUCING the winter fuel allowance for pensioners by 20% up to 74 years old – and by 25% for those over 74.

This Government is a disaster and should be disbanded.

On Tuesday 22nd March 2011 Diesel at our local garages was 138.9p. This morning, 25th March 2011, AFTER the Budget, the price is 139.9p. I expect it will reduce by 1p in the very near future.

I regret that while 1p off petrol may be relevant to the urban majority, but it does nothing for those of us living in really rural communities. We have no access to public transport, nearest bus 3 mile round trip, nearest railway station, 24 miles round trip, doctors surgery 16 mile round trip, post office 3 mile round trip etc etc.
Others in rural areas are even further away from, such facilities. I am aware that it would be very difficult to differentiate between urban and rural and if such was done, others would expolit any rural advantage. However, if fuel price reductions are to be fully effective, they must recognise differentiations between Urban and Rural community transport needs. North Yorkshire, most of Lincolnshire, the Highlands, parts of Wales and the West country for example, cannot be compared with any of the Urban centres where public transport is, by comparison, readily available.
1p off petrol /dieso, no benefit to rual elements what so ever.

Mike H says:
27 March 2011

A complete waste of time, nobody expected the 5p increase in fuel duty next week, it would have been cancelled what ever the government in power. Labour proposed increases on two or three occasions but they were cancelled or delayed. Remember that VAT was increased to 20% that was not considered or on the cards when the this round of increase in fuel duty was proposed. The 1p decrease will do nothing, in most areas motorist could have saved more by just shopping around. My local garage (consistently one of the cheapest in the area) increased the price of petrol and diesel by 3p in the week leading up to the budget and while the 1p deduction has held at the same garage for four days, I do not expect the current price to stay at that rate for much longer and then it will be back to the pre budget price or even higher. This government has lost credibility and doesn’t know what it is doing but is trying to do it far too quickly, it criticised hastily put together legislation whilst in opposition and is now doing exactly the same now itself.

Steve says:
30 March 2011

Well there was one true ray of sunshine for those of us who drive our own cars for work, a 5p/mile increase in the amount we can claim before being taxed (at least on the first 10k miles per year) which will make a lot of self employed up to £500 pa better off.