Fuel prices are set to rise by 12p a litre this spring, unless the Government acts to stop it by committing to a further duty freeze.
The Government’s budget watchdog, The Office for Budget Responsibility (OBR), has pointed to a ‘planned 23% increase in the figure duty rate in late-March 2023’, buried inside its backgrounder to Jeremy Hunt ’s autumn statement on Thursday. The move, which could impact millions of motorists, was not mentioned.
The OBR said 12p a litre would be added to pump prices if the Government did not extend the expiry date for the 5p a litre cut that was announced in the spring statement last year. As things stand, it is due to come to an end in late March next year, and the rise would boost Government coffers by £5.7bn.
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A Treasury spokesperson said: "The 23% figure came from the OBR, not the Treasury. It is based on forecasts that are subject to change. We have not announced anything on fuel duty today - the existing 5p cut will remain in place until March 2023 (a tax cut which is worth £2.4bn), and final decisions on fuel duty rates will be made at the spring budget." When asked about the measure on Friday morning Mr Hunt told BBC News: "Well, let me clear on that. That is not Government policy. We will make a decision on that at the next budget in the spring. "
Mr Hunt's autumn statement included other significant tax rises, such as freezing tax thresholds – as well as cuts to departmental budgets. A plan to cap social care costs was postponed by two years.
There have been calls for the Chancellor to clarify the Government's decision, but speaking on Friday morning, the Chancellor warned that "over the next two years it is going to be challenging". Mr Hunt said people wanted a "Government that is taking difficult decisions, has a plan that will bring down inflation, stop those big rises in the cost of energy bills and the weekly shop, and at the same time is taking measures to get through this difficult period".
The OBR warning comes just a day after 23 Conservative MPs - including former home secretary Priti Patel and former Northern Ireland secretary Brandon Lewis - wrote to the Chancellor, calling on him to cut fuel tax. Speaking after the autumn statement, fellow Tory Craig Mackinlay said: "This cannot happen and will be opposed by a huge number of MPs. It would be beyond ridiculous to give a generous lift to benefits and pensions simply to take it away in an inflation busting fuel duty rise. "
Tory MP Jonathan Gullis - who wants fuel duty to be cut further - has written to the Chancellor, calling on him to "listen to motorists, van drivers and truckers, who are already being smacked hard with cripplingly high taxation" and prove to them the Government "actually have their backs by keeping the price at the pump down," and Fair Fuel UK founder Howard Cox said: "Yet another Chancellor, it seems, who doesn’t understand that the cost of filling up is the biggest influence on inflation and the cost of living. High fuel costs and taxes damage GDP, close businesses, restrict travel and reduce spending."
The RAC called for an overhaul on the current system, which head of roads policy Nicholas Lyes said was "on borrowed time given the numbers of zero-emission vehicles on the roads that pay no fuel duty whatsoever".
"As things stand, drivers will face an enormous hike in the cost of fuel next spring due to fuel duty going up," he said. "The Government has always made a big deal of cancelling duty rises in the past and will face colossal pressure to do the same next year - after all, a rise of these proportions would heap yet more misery on the millions of households that depend on their vehicles, most of whom will just endured one of the costliest winters on record.
"Instead, we urge the Government to focus on giving serious thought to developing a fair taxation system that can eventually replace fuel duty, which is effectively on borrowed time given the numbers of zero-emission vehicles on the roads that pay no fuel duty whatsoever."
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