Retaining the fuel duty cut in the budget is a regressive policy that benefits the wealthiest in society, who will save £60 a year, while those who earn the least will save just £22, according to analysis.
Jeremy Hunt on Wednesday announced an extension of the 5p cut in fuel duty brought in during 2022, for which he has won plaudits across the rightwing press.
But the Social Market Foundation (SMF) thinktank found the freeze, expected to cost £5bn a year, is bad value for money and benefits the wealthiest in society who tend to own more cars, and drive less fuel-efficient vehicles such as SUVs.
Combined, the fuel duty freeze, which has been in place since it was introduced as a temporary measure in 2011, and the 5p cut to fuel duty, have cost the Treasury £100bn since 2011, according to the SMF analysis.
The two tax cuts to fuel are expected to knock £27bn off Treasury coffers over five years. The Conservatives attacked Labour’s ditched £28bn green investment promise over the same period as ruinously expensive.
Critics have said the fuel duty cut “helps the rich” while doing “little for the economy” as public transport worsens in quality.
In total, the SMF found the bottom fifth of earners would receive just 10% of the savings, compared with the top fifth who would pocket 24%.
Chris Todd, the director of the campaign group Transport Action Network, said: “We need to increase investment in public transport to help level up and give people better access to jobs, healthcare and recreation. Instead, we’re seeing services slashed to subsidise cuts in fuel duty. These cuts mostly help the rich and do little for the economy. Those in need suffer most from poorer services and the higher levels of pollution that will follow.”
Sarah McMonagle, the director of external affairs at Cycling UK, said: “Far too many of us are dependent on our car but that’s because the government has failed to invest long term in public transport, cycling and walking, to give more people affordable, safe and reliable alternatives to driving. The public needs integrated transport policies and long-term investment, not political rhetoric about standing up for drivers.”
The SMF has suggested more equitable and green ways to cut motoring costs, which would be investing in public transport, that “provide cheaper alternatives to driving for those who want to switch and decreases congestion for those who don’t”.
The analysis found that for every 10% increase in public transport speed relative to driving, the average household saved £435 a year on transport costs.
Electric vehicle drivers spend almost half as much fuelling their car as the equivalent petrol or diesel model, and the SMF has calculated that if the initial price of an electric vehicle was the same, households would save an average of £900 annually. The thinktank suggests the government should instead spend the money used to cut fuel duty to build charge points and help lower-income households afford electric vehicles.
Gideon Salutin, a senior researcher at the SMF, said: “Listening to the rhetoric around fuel duty, you would think freezes provide immediate relief for low-income households and working-class commuters. But those are the households that tend to drive less, own fewer cars and travel more efficiently.
“By constraining fuel duty, the government is wasting billions of pounds every year while robbing low-income households of cheaper options like public transport and EVs. These could pull millions out of poverty, but instead we’re wasting billions on unjust cuts.”
