Massive rise in fuel duty would add 12p to price of litre of petrol

DRIVERS will be hit with a record rise in fuel duty that would add 12p to the price of a litre of petrol if the Government goes ahead with a planned increase next year.

The proposed 23 per cent increase pencilled in for 2023 will raise £5.7billion, according to the Office for Budget Responsibility (OBR). If it were to be put in place today, this would push the average price of diesel to a record of more than £2 a litre. Unleaded would rise to £1.76 per litre.

The OBR listed the planned rise as an “adverse economic and fiscal risk” in its assessment of Jeremy Hunt’s budget.

It said the increase in the fuel duty rate in late March “would be a record cash rise and the first time any Government has raised fuel duty rates in cash terms since Jan 1 2011. It is expected to raise the price of petrol and diesel by around 12 pence a litre.”

The rise would reverse a cut made in March this year of 5p per litre, which the Government put in place amid what it described as “unique circumstances globally, including the war in Ukraine”.

Fuel duty is the highest levy placed on diesel and petrol, at 52.95p per litre, followed by VAT at 20 per cent.

The Government already rakes in £26.2billion from the tax, about 2.7 per cent of all Treasury receipts. It is the equivalent of about £930 per household.

Before the announcement, Simon Williams of the RAC warned that fuel prices were a large driver of inflation, since the rise would add to transport costs for goods.

He said: “Our analysis shows there is a clear link between inflation – however it’s measured – and fuel prices. When the prices drivers pay to fill up rise, inflation seems certain to follow.

“Last month, the Office for National Statistics stated the single main reason inflation wasn’t higher was because fuel prices had fallen through the summer. Unfortunately, going into the autumn pump prices have been increasing again which we fear will only put further upward pressure on the headline inflation rate.”

Although fuel duty is meant to rise in line with inflation, the increase has been repeatedly cancelled by ministers to spare drivers from higher costs.