Chancellor responds to pressure over fuel duty

 

UPDATE: The Treasury is making clear that the planned 3p fuel duty rise due in August has now been postponed until January 2013. Postponing planned rises is the way that the duty has been frozen under this government and the last one.

Ministers have taken the decision even though oil prices are currently falling worldwide. The price of crude oil has been falling steadily since March/April. The most recent peak was at above $125 a barrel for Brent crude, the leading benchmark. Falling demand, with a weakening global economy, has now seen that drop to today's $92 a barrel.

At the pump, unleaded had been above 142p a litre. Yesterday the average price of unleaded petrol was 132p a litre. This week Asda and Tesco have both been cutting prices, with Asda promising not to charge more than 127.7p a litre.

The Treasury points out, however, that pump prices are still mainly above the level at the time of the Budget of 2011, when the chancellor took the decision to scrap the so-called fuel duty escalator which produced automatic above inflation duty rises.

The cost of the latest decision is £500m and the Treasury claims that it will be paid for by higher-than-expected departmental savings.

The government was facing a vote in the Commons on fuel duty in which it would have been opposed by Labour and some Tory backbenchers. Half a dozen Conservative MPs had signed an Early Day Motion calling for a duty freeze. This morning the shadow chancellor called for the duty to be frozen in an article in The Sun and on Radio 4's Today programme.

In the last few moments Ed Balls welcomed what he described as another U-turn to join those on pasties, churches, caravans and skips.

Only a few days ago the Transport Secretary Justine Greening said that she would not be calling for a freeze in duty.

15:21: The Chancellor of the Exchequer has just announced in the Commons that he will not proceed with the planned 3p increase in fuel duty this August.

In his Autumn Statement George Osborne postponed a scheduled 3p rise in fuel duty for January but said that the planned rise this Summer would proceed - even though it would be cut from 5p to 3p.

He has now responded to pressure from some Tory backbenchers and The Sun newspaper who were joined by Labour today when Ed Balls called for the duty to be frozen.

This comes on a day when official figures showed people's standard of living dropping. Petrol is for many families the largest contributor to a squeeze on their incomes.

 
Nick Robinson Article written by Nick Robinson Nick Robinson Political editor

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  • rate this
    +8

    Comment number 3.

    This budget was the most poorly thought through i have ever seen. Cuts for the rich combined with increased taxes on pensioners and a raid on the petrol pumps (blue/white collar workers) was a recipe for disaster.

    Fuel duty and VAT on fuel is already OTT thanks to Labours pandering to the barmy greens that wont be happy until they grind the country to a halt.

  • rate this
    +7

    Comment number 21.

    15

    Oh that he could! But he can't as aircraft fuel is protected from taxation by international treaty.

    This is the big swindle that the little people are taxed by this fuel price escalator thing because by driving our little cars we are endangering the planet whilst huge jets can fill up for nothing as they are helping the economy.

    Hypocrisy, hypocrisy, hypocrisy!

  • rate this
    +6

    Comment number 24.

    The budget illustrates that there is no more room for further taxation. To increase the tax take requires a growing economy and we don't have one.

    Given the general economic picture this is pretty much to be expected. It will take years to rebalance the economy into adding value rather than consuming so the game has to change.

    Only work will get us out of this and that is alien to most.

  • rate this
    +6

    Comment number 20.

    "We give the impression of being in office but not in power"

    This was how Lamont described Major's govt when he resigned, & DC is heading the same way as Major! If this makes sense now, then it made sense in April. This is the difference between shaping events & being shaped by them.

    DC needs to learn that voters respect strength & conviction, they don't respect 'rabbits in headlights'

  • rate this
    +6

    Comment number 16.

    Let's be honest for years chancellors of both parties have displayed complete arrogance over taxation - Gordon Brown's use of stealth taxes and this government's grubby attempts to find more things to tax. It's about time we had a wide debate on what taxation is reasonable and what is not. This matter should not be left to out of touch Treasury civil servants.

 

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