The government has announced fuel duty will be frozen at the current rate in the Spring Budget, in a widely expected move and marking a big tax break for British motorists.
Chancellor Jeremy Hunt confirmed the extension of the 5p per litre cut on petrol an diesel will be maintained, with a freeze extended for another 12 months.
“The Shadow Chancellor complained about the freeze on fuel duty and Labour has opposed it at every opportunity,” Hunt told the Commons.
“The Labour Mayor of London wants to punish motorists even more with his ULEZ plans. But lots of families and sole traders depend on their car.”
Hunt claimed the freeze would “save the average car driver £50 next year and bring total savings since the 5p cut was introduced to around £250.”
Without the intervention, fuel duty would have increased by 13 per cent this month,” he added.
The policy is estimated to cost the Treasury around £5bn but will not narrow space for other tax breaks as the it has been frozen since 2011. Stated government policy is actually that fuel duty should rise in line with inflation.
It comes after the average price of petrol and diesel rose by 4p and 5p a litre in February, the biggest increase in five months.
Unleaded is up to 144.76p, adding more than £2 to the price of a tank, while diesel has increased to 153.22p, according to analysis from motoring group the RAC.
Responding to the announcement, RAC head of policy Simon Williams, said: “With a general election looming, it would have been a huge surprise for the Chancellor to tamper with the political hot potato that is fuel duty in today’s Budget. It appears the decision of if or when duty will be put back up again has been quietly passed to the next government.”
“But, while it’s good news that fuel duty has been kept low, it’s unlikely drivers will be breathing a collective sigh of relief as we don’t believe they’ve fully benefited from the cut that was introduced just two years ago due to retailers upping margins to cover their ‘increased costs’. This has meant fuel prices have been higher than they would otherwise have been.
Lisa Watson, director of sales at Close Brothers Motor Finance, said: “Extending the ‘temporary’ fuel duty cut by 12 months will come as some relief to motorists concerned about the soaring cost of driving from A to B.
“Whilst only likely to have a small positive impact, it’s a step in the right direction, particularly for the 53 per cent of drivers who cite fuel prices as the biggest challenge in the next 12 months.
“We’ve seen continuous hikes at the pumps over the last few months and this has added further pressure to drivers who already feel they’re faced with increased costs from all lanes, making car ownership difficult to afford for 62 per cent of drivers. What is essential now is that this cut reaches drivers’ fuel tanks and wallets.”
Ahead of the Budget, Hunt outlined his desire to bring down the tax burden, which is forecast to hit record levels regardless of today’s announcements.