Chancellor scraps 3p fuel duty rise

  • Planned fuel duty rise in January axed
  • AA welcomes decision in light of austerity
  • Rise would have meant £2-a-tank increase

Motorists will be breathing a sigh of relief today after Chancellor George Osborne confirmed that a planned rise 3p rise in fuel duty will be scrapped.

The tax was due to rise by 3.02p per litre on January 1 2013, but the Chancellor revealed in today's Autumn Statement that this hike will be axed. The true rise would have been 3.6p per litre, as VAT is charged on top.

The rise has been looming over UK motorists’ heads for some time now. Osborne had cut 1p from fuel duty in the March 2011 budget but a 3p rise was planned for August. In June the chancellor bowed to public pressure and delayed it until January.

According to website Petrolprices.com, average petrol prices are 133.25p while diesel prices stand at 141.23p per litre on average.

Fuel duty now remains at 57.95p per litre of petrol or diesel. It raises about £27 billion a year in tax revenue but the Government has had to tread carefully in order to keep UK motorists on side.

Motoring organisation the AA welcomed the decision, after persistently lobbying the Government to keep fuel duty down.

AA President Edmund King said: “Chancellor Osborne’s decision to cancel the January fuel duty hike avoids a New Year’s headache and a long hangover for all drivers."

In 20 years, UK motoring has cut its fuel consumption by 20% (12.8 billion litres), but contributes 144% more (£15.81 billion) in fuel duty tax.

According to the AA, the proposed 3p litre fuel duty hike would have added almost £2 a tank for the average car filling up, and £2.50 for ‘Mondeo Man’. The motoring organisation has also told the Chancellor that, according to its own poll, 73% of drivers are cutting back on spending, journeys, or both due to the high cost of fuel. 

1. Price breakdown of a litre of fuel

Petrol – latest average UK price 133.19p a litre, of which:
Duty – 57.95p
VAT – 22.20
(Total tax = 80.15 or 60.2%)

Wholesale price* - 46.65
Margin/transport/etc – 6.39p

Diesel – latest average UK price 141.06p a litre, of which:
Duty – 57.95p
VAT – 23.51p
(Total tax = 81.16 or 57.5%)

Wholesale price* - 52.69
Margin/transport/etc – 7.21p

(* Wholesale values from 14 days ago to reflect time taken to reach the pump. Source: fuelpricesonline.com) 

 

2. Impact of 3.02p-a-litre fuel duty increase

With VAT, extra cost per litre of petrol or diesel is 3.62p a litre.

Refuelling a car: small car (50 litres) = + £1.81, Mondeo (70 litres) = + £2.53

Two-car family extra monthly cost (106.17 ltrs per car) = + £7.69 

 

3. Fuel duty changes

23 March 2011 – 57.95

1 January 2011 – 58.95

1 October 2010 – 58.19

1 April 2010 – 57.19

1 Sept 2009 - 56.19

1 April 2009 – 54.19

1 December 2008 – 52.35

1 October 2007 – 50.35

2 July 1997 – 40.28 

 

4. Treasury fuel duty receipts – financial years

2011/12 - £26.80bn from 50.60 billion litres of fuel

2010/11 - £27.26bn from 51.70 billion litres of fuel

2009/10 - £26.20bn from 52.83 billion litres of fuel

2008/9 - £24.62bn from 54.15 billion litres of fuel

2007/8 - £24.91bn from 56.17 billion litres of fuel

1997/8 - £19.46bn from 57.59 billion litres of fuel

1991/2 – £10.99bn from 63.40 billion litres of fuel

(Source: HMRC)    

Parkers top tip:

To see whether you are better off buying petrol or diesel, use the Parkers Cost of Motoring Tool to see which is the most cost effective.