Drivers face petrol price rise in next month’s Budget
THE price of petrol looks set to go up for the first time in two years as Chancellor George Osborne struggles to balance his books.
Experts warned yesterday that thanks to dwindling tax receipts, next month’s Budget is likely to include a increase in fuel tax, which has been frozen since 2011.
The Institute for Fiscal Studies, an independent think-tank, says the Chancellor’s aim to wipe out Britain’s budget deficit ‘depends on him raising fuel duties’ in line with inflation from April.
The price of unleaded has fallen steadily from around 130p a litre two years ago thanks to a slump in world oil prices.
But an inflation-linked tax rise would push up the current average of £1.02 to over £1.03, adding 80p to the cost of filling up a family saloon.
It would mark a major U-turn by Mr Osborne, who used his final Budget before last year’s election to boast that families got ‘£10 off a tank with the Tories’.
But the IFS says it would cost the Treasury £3billion to freeze fuel duty for five more years. And the Office for Budget Responsibility – the official Treasury watchdog – is warning of even steeper rises in future years.
It expects Mr Osborne’s fuel tax revenues to increase from £27.4billion this year to £29.7billion in 2020-21.
Critics warned that an increase in fuel duty would ‘ go down very badly’ with voters and harm the economy at a time when growth is slowing. Campaign group FairFuelUK called for a 3p cut in duty to ease pressure on the haulage industry and protect households and businesses from a slowdown in the global economy.
It hit out at ‘nonsensically punitive levels of taxation’ on fuel, pointing out that tax and duties already make up around three quarters of the price at the pumps on forecourts.
Howard Cox, founder of the Fair- FuelUK campaign, accused the Chancellor of ‘helping out’ large companies such as Google and Facebook with what he called ‘favourable’ tax deals: ‘So why not be open and fair to the UK’s 37million drivers too?’
The Chancellor has pledged to run a surplus every year from 201920 during ‘normal times’ – or when the economy is growing at an annual rate of 1 per cent or more.
But with a surplus of just £10billion planned for the last year of this Parliament he has very little room for manoeuvre and could be knocked off course by weak economic growth. In its ‘Green Budget’ yesterday, the IFS said the Chancellor has been ‘boxed in by his own rule’ leaving him facing a ‘precarious balancing act’ in the Budget next month.
Andrew Goodwin, of Oxford Economics, said economic growth in the UK ‘remains underwhelming’ despite the ‘sugar rush’ of low oil prices that has left families with more money to spend.
Tory MP Mark Garnier, a member of the Treasury Select Committee, said: ‘He hasn’t increased fuel duty for years but with petrol at around £1 a litre this is as good an opportunity as ever to do so.’ Luke Bodset, a spokesman for the AA, said: ‘I think it would go down very badly. It would set alarm bells ringing behind every wheel in the UK.’
A Treasury spokesman said: ‘We cut fuel duty by p per litre in March 2011 and cancelled all further increases until 2015-16.
‘This is the longest freeze in two decades and in comparison to the previous government’s plans means the typical motorist saves £9 each time they fill their tank.’