IT’S time for the Chancellor to wake up and to smell the coffee, to realise what is transpiring in the economy due, enormously, to recent falling pump prices and for him to strengthen these financial benefits further with a 3p cut in fuel duty.
Fanciful, a pipe-dream and unlikely to be implemented by the nation’s guardian of fiscal policy? That will be the consensus amongst most of the electorate. Yes, maybe so, but could George Osborne really be convinced to take a chance?
To do exactly that and deliver what all economic experts say, including his advisors, that the short-term gains that have been measured since the freeze in duty was put into place since 2011 will extend for decades, boosting GDP to higher levels than previously estimated.
A ground-breaking report published by the Centre for Economic and Business Research confirms that the lower petrol and diesel prices of 2015 have raised UK GDP by at least 0.6 per cent, created an extra £11.6bn of economic activity, 121,000 jobs and boosted government tax revenues. All this being achieved without a substantial cut in duty. So imagine what a 3p per litre decrease will do.
The historic fiscal research, commissioned by FairFuelUK, shows that the low oil and fuel forecourt prices seen this year have increased business investment, lowered production costs and improved household spending across the UK economy.
But more saliently, the data also proves that the suspension of the government fuel duty escalator has increased tax revenues to the Exchequer by a net gain of £1.3bn. Had Labour’s fuel escalator been in place, the extra burden to the economy would have been £4.9bn. These are the facts, not economic predictions.
Filling up the average family petrol tank in Poland now costs motorists £33. In the UK, it is 60 per cent more at an eye-watering £52, and diesel incredibly even two thirds pricier. The EU average for petrol is 18 per cent cheaper and 33 per cent lower for diesel.
Our haulage industry is competing with one hand tied behind its back. Foreign truckers with mega-sized tanks buy cheaper fuel in the EU and drive around the UK never filling up and accordingly not contributing any duty to the Chancellor. The UK’s position as the high-priced fuel nation is entirely down to punishing taxation, further compounded by the heinous VAT on the duty itself.
Talk to any of our 1.2 million supporters and you will be in no doubt of the wrath felt towards governments of all political persuasions towards the price of filling up and how 37m drivers are incessantly fleeced by successive governments. Year after year, motorists, van drivers and truckers are subjected to the most penal fuel taxation levels seen in the Western world. With total fuel tax and VAT now rapidly approaching 75 per cent every time we fill up, those special advisors to the Chancellor in Whitehall will be reluctant to cut this “easy to collect” levy.
But with all the first-hand economic evidence they should advise otherwise. It is manifestly obvious and now unquestionable there is actually no risk to cutting duty. At FairFuelUK, we call on the Chancellor of Exchequer to implement a 3p cut for 12 months and test out the positive impact that such a bold move would achieve. Taxes from the consequential growth due to this cut will be massively positive. In contrast any dogged and true to type increase in duty will cost jobs, reduce growth, raise inflation and inhibit business investment. An anathema to fiscal common sense.
Labour’s planned increases in fuel duty were continued in the first year of the coalition Government back in 2010. In the following year’s Budget, due substantially to our intensive campaigning, fuel duty was cut by 1p per litre. Since then, the inflation rises in duty planned have been postponed too.
Mr Osborne also announced that the fuel duty escalator introduced by the previous Labour Cabinet, which would have added an extra penny above inflation, was to be scrapped. So Mr Osborne does seem to have an empathy for fuel duty to be kept at rational levels. But he still will not make that quantum leap of faith, and cut duty significantly.
Instead the spectre of a “fair Fuel stabiliser” remains from March 2012. The Chancellor confirmed that above inflation duty rises would return only if the oil price fell below £45 on a sustained basis. We are at that point where oil prices are indeed below this trigger point to allow him opportunistically to hike duty in next year’s Budget, if not before.
It’s manifestly wrong to increase fuel duty ever again. The proven economic sanity in cutting fuel duty is there for all to see. FairFuelUK will up the ante to the March 2016 Budget by lobbying and persuading the decision-makers to smell that coffee.
Howard Cox is founder of the FairFuelUK campaign.