No fuel cost cut expected for 2012 Budget

  • Motorists expected to lose out in the March plans
  • Price of diesel hits new record high of £1.55 per litre
  • Parkers live coverage of the Budget starts March 21

Car owners are set to see little reprieve in the rising price of fuel, with no plans to cut costs in the upcoming Budget.

The news comes as diesel prices hit a record high of £1.55 per litre in some areas of the UK. The average price across the country, according to petrolprices.com, has risen to £1.44p per litre. At the same time petrol prices have hit an average £1.36 per litre.

The current prices mean that filling a Volkswagen Golf 1.6-litre TDI BlueMotion model, with a 55 litre fuel tank, could cost £79 to fill based on the average price. Find yourself at the most expensive petrol station and this could be £85 to brim. At the same time petrol Golf models with the same size fuel tank costs around £75, on average.

Despite these high prices the Chancellor, George Osborne, is unlikely to take any action in the Budget on March 21.

In last year’s Budget Osborne delayed a 3p rise in fuel duty. Due to be implemented in January this year, the increase will instead go ahead as planned in August. The chancellor also scrapped Labour’s “escalator”, which raised fuel duty by 1p above inflation every year. Now it is now index-linked.

While some claim that the actions last year helped to cut down costs, or at least keep them manageable, the increase in some road tax costs means there were little savings made by many motorists.

According to reports, Osborne claims that there isn’t enough money available in the next Budget to cut the tax on fuel any further. At the same time the fact that fuel prices have remained stable, despite being very high, means the Chancellor is unlikely to take any action.

The price of diesel and petrol at the pump has risen by 25% and 20% respectively in the last two years. As a result, fuel consumption fell by almost 1.9bn litres in the first nine months of last year, compared to 2008 levels, resulting in a £1.09bn loss in fuel duty for the Treasury.

The cost of diesel is the major worry. Traditionally petrol-engined cars held the majority of annual sales in the UK – in 2000 only 15% of cars sold were diesels. Now the diesel/petrol sales split is around 50/50.

That trend might slow down as consumers anxious to make savings by purchasing fuel-efficient, less-polluting vehicles are seeing their potential cost-cutting actions wiped out by much higher diesel prices at the pumps.

Although the decision to defer the fuel duty rise was welcomed by motorists, a campaign by pressure group Fair Fuel UK, backed by motoring organisations, is calling for a cut in fuel duty. A demonstration is planned for March 7 in advance of the Budget.

In a letter to Mr Osborne, President of motoring organisation AA Edmund King called on the Chancellor to not only abandon the planned inflation-linked hike in August but to scrap the policy of RPI-linked increases altogether.

Peter Carroll, founder of Fair Fuel UK said: “If the Chancellor were to cut fuel duty it would stimulate the economy to an extent that would more than compensate for the impact of the cut on the Treasury’s tax take."

The 2012 Budget takes place on March 21. Come back to Parkers.co.uk for live coverage of all the issues that could affect you and your car.