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Chancellor caught in the headlights on fuel prices

22 February 2013

George Osborne is getting used to the twice-yearly battle that precedes an autumn statement or a budget when motorists, newspapers and some of his own MPs start haranguing him on fuel. It’s the Times’ splash today, with petrol prices expected to rise to their highest-ever levels, and campaigners calling once again for the Chancellor to cancel September’s fuel duty increase when he makes his Budget statement next month.

As I reported back in January, Tory MPs want this Budget to be another cost-of-living statement, which, like the autumn, allows the Coalition to demonstrate that it is doing all it can to hack away at the major pressures on voters’ wallets. The Sun’s ComRes poll this week found that 39 per cent of voters want the Chancellor to cut petrol prices by 14p a litre, so the pressure is there from voters, too. So another cancellation or delay would be a quick way of Osborne showing he listens to the concerns of hardworking families, striver drivers, or whatever name he wants to give them.

But there are two problems. The first is the obvious point that fuel duty raises money, and Osborne isn’t mulling cancelling them in a time of plenty. As Jonathan explained yesterday, he’s got quite a task ahead to be able to say the deficit is going down in every year of this parliament.

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The other is that continually delaying the inevitable is hardly the hallmark of a calm, strategic Treasury; more one caught in the headlights and panicking. In its report on the Autumn Statement, the Treasury Select Committee pointed out that planned increases in fuel duty were being repeatedly cancelled or deferred, as shown in the table below:

(You can view a larger version of the table here.)

The Committee said that ‘recent government policy on fuel duty has failed to provide either the certainty or the stability that are the hallmarks of good tax policy. The Chancellor must use the 2013 Budget to set out a clearer strategy for fuel duty over at least the medium term’. If he doesn’t, the Chancellor will know what to expect in the run-up to every Budget and autumn statement that he faces over the next few years.

Join us after Osborne delivers his Budget to discuss ‘Whatever happened to the recovery?’ Andrew Neil, Fraser Nelson and James Forsyth will discuss what the 2013 Budget means for Britain’s economic future on 20 March. Click here to book tickets.

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Show comments
  • HooksLaw

    ‘whatever happened to the recovery?’
    Ask the Eurozone

    Is the British government to blame for the fact that,
    ‘The eurozone will remain mired in recession for a year longer than originally foreseen, the European Commission has indicated, as it slashed growth forecasts for the troubled currency bloc.’ ??

    Does it occur the the schoolboys at the Spectator that there are other forces afoot which are hindering the world economy?
    The EU think the German economy will grow by a massive 0.5% this year.

  • The Sage

    Let’s also remember that a large slice of what the government collects from fuel is in fact VAT. As this is levied as a percentage, then the take increases as the price increases and as it is at the moment.
    As such. Mr Osborne does not need to increase fuel duty as the Exchequer is already getting more money per litre.
    Furthermore, it should be noted that the government’s income from fuel duty is falling (and failing to meet projections made in 2010) as more fuel-efficient cars come onto the the market and drivers adopt more fuel-saving driving methods – such as driving at slower speeds on motorways.
    So putting up the duty can be counter production in terms of generating more tax overall from motorists.
    In fact, there must be some sort of motoring Laffer Curve at work here.

    • HooksLaw

      A possible policy would be to set the duty as a percentage, so that as prices rise the tax take goes up. However petrol prices are volatile and believe it or not can fall so that does not necessarily ‘provide either the certainty or the stability’ we are told we need..

      It is noticeable that neither the Committee nor the Spectator chose to inform us of their policy or solution.

  • Tom Tom

    Can we spend Fuel Duty on Potholes ? Could we perhaps save spending on suspensions and springs by having roads that look like we are in a modern country ? Maybe infrastructure would make businesses and consumers happier to invest and consume ?

  • @PhilKean1

    Osborne is caught in the headlights, PERIOD !

    I assume you meant – “increasing fuel duty raises revenue”?

    So did Brown’s economically-destructive raising of the top tax rate to 50p. It is just that it has cost £7 bln MORE than it has raised.

    Fuel duty should be viewed in exactly the same light.

    • kyalami


  • Davey12

    Not a penny increase in any taxes.

    We have a women with 11 kids, half a million pound home, horses flying lessons for her hubby and now 1 grand for a parrot.
    We have thousands of Jihadis alll being told to live on benefits.
    We have 4 million who have never worked.

    Any tax increase is theft. All tax is theft when it is abused in this country.
    Do anything you can not to pay taxes or to pay as little as possible. Those guys being named and shamed by the government for tax crimes should be looked upon as heroes.
    Jimmy Car is a tax hero. Starbucks should be given a medal.

  • Russell

    How about putting 5 or 10 pence on a litre of petrol/diesel and scrappring vehicle exise duty (Road Tax), then the people with the largest and usually the vehicles that are most uneconomic and/or those who drive the most miles on our roads, pay the most tax.
    With a bit of careful pricing, he could please a lot of people who would be paying less than their current road tax and take in more cash for the treasury. Also some savings in the road tax administration costs, and the elimination of all those who illegally currently don’t tax their cars.

    • HooksLaw

      Do you know that people with economic cars pay no road tax or say £30? So based on that then in order for your life to be improved marginally, hundreds of thousands of typically poor (and of course ‘hard working’) families in say rural areas will be penalised?

    • ButcombeMan

      This or something like this has been suggested many times. The “tax disc” could easily be administered by the insurance companies and include evidence of insurance. with only a rump DVLA to deal with changes of ownership.

      It never came to pass because the UK is very poorly run.

      • Patrick

        We do this in Kenya so surely the Brits could do? No vehicle tax, duty added to the fuel price but cars have to display a valid insurance sticker which the police check. Why is the UK the only place, I think, where the price of diesel is higher that petrol? I know we have to thank the ex-Prime Mentalist from Kirkcaldy but why doesn’t this government reverse it?

    • Tom Tom

      France did this and their petrol prices are not higher than ours

  • kyalami

    Cut the duties on fuel by 50p a litre.

    It will be a great shot in the arm for the economy, the typical voter will be delighted and the Tories will win the next election.

    (And if the environmentalists don’t like it, suggest the duties will be increased by 5p a litre every six months as the economy picks up).

    • Makroon

      This is just a seasonal synthetic campaign (I mean, the Sun ? the AA ? give me a break !)
      The best way to bring down petrol prices is to have a quiet word with Morrison/Tesco/ASDA/Sainsbury. The much maligned super-markets are the only force capable of restraining the rip-off merchants “on the forecourt”. Whenever the super-markets don’t have an offer on, the spivs ramp the market.

      • kyalami

        The so-called spivs on the forecourt make a tenth of what the government do on each liter of fuel. To get the price down the government has to cut fuel duty.

        • Makroon

          True, but “cheap gasoline” is a 1950s wet dream, it ain’t going to happen.
          And with King’s ravaging of Sterling, prices are likely to rise more in the near-term.
          At the moment, forecourt prices have been edging up with no justification except lack of competitive pressure.
          This is just the usual pre-budget stunt by a couple of “tribunes of the people” (the Sun and AA), amplified by the Speccie boys on a quiet news day.

          • kyalami

            Your comment really doesn’t make sense. In one sentence you admit sterling has been dropping, which would push up the price of imported oil. In the next you say forecourt prices have been going up with no justification.

            We’re not talking “cheap gasoline” here. We are talking about getting the price below £1/litre, which it was just a few years ago – not the 1950s!

    • Makroon

      Yeah, because Osborne won such acclaim when he cancelled Brown’s fuel escalator didn’t he ? Humph !

      • kyalami

        There is a vast difference between not increasing the price and reducing it by a third. It would turn around both the economy and the Conservative’s prospects of winning the next election.

  • telemachus

    Courage Osborne
    Hold your nerve
    If you give in you will need to keep giving in
    If we get in our cars we should pay
    We do not have to get in our cars

    • kyalami

      You may not have to get in your car. Many do. My previous commute was 35 minutes by car or 2 1/2 hours by public transport.

      • telemachus

        I guess you are one of the fortunate to still have a job under the Coalition

        • kyalami

          If you’d followed unemployment, you would know that it shot up starting in 2008 and for the last year has been dropping. This is in contrast to the EU, where it continues to steadily increase. The latest ONS data shows employment increasing by 154,000.

          And, no, I am unemployed, which is why I wrote “my previous commute”.

        • Harold Angryperson

          One of the fortunate 92%?

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