Budget 2010 - AA Response

Treasury avoids 3p April fuel's fiasco

24 March 2010

Fuel Duty

The AA president said "staging the fuel duty increase will avoid a big hit in an April Fuel's Day Fiasco, however a 1p increase will still hit motorists hard with record prices at the pumps. Perhaps the thought of 32 million fuming drivers and voters influenced Government thinking?"

The AA will examine closely any phased introduction of further fuel duty increases of 1p in October and the remainder in January. Each 1p increase is 50p a tank and £2.12 a month for a family with two cars, an increase that is higher than the average increase in council tax for 2010-11(£1.56).

If pump prices continue to increase the Treasury should rethink their proposals.

"Drivers' relief at the Chancellor not raising fuel duty by 3p on April Fool's Day will be short-lived if prices continue to rise. The immediate rise of 1p per litre will cost 50p a tank more to fill up.

"Had the inflation + 1p increase gone ahead, it would have added £1.50 to the typical cost of refilling a petrol or diesel car, or £37.50 a year. For a family with two petrol cars, that alone would have been four times the average increase in council tax* for this coming year" says Professor Edmund King, the AA president.

"In the last Pre-Budget Report, the Treasury admitted that high fuel prices make drivers cut back and reduce tax receipts**. It therefore makes sense not to increase the burden on families and businesses struggling to recover from recession – inflicting more pain for no gain, and undermining economic recovery."

Roads

The AA welcomed the extra £100m for local roads and potholes. This was the amount spent on filling potholes last year. King said "The AA had campaigned for extra funding to fill the potholes and are delighted that the current pothole plague can be addressed."

Factfile

*The average increase in council tax will be around 36p a week, or £18.72 a year.

http://www.lga.gov.uk/lga/core/page.do?pageId=8729828

**Pre-Budget Report 2009 - Annex B: The Public Finances, section B68

http://www.hm-treasury.gov.uk/d/pbr09_annexb.pdf

B.68 Fuel duties in 2009-10 are expected to be £0.2 billion below the Budget 2009 projection. Relative to the Budget, a deeper downturn in the first half of 2009 and a higher oil price negatively affected fuel duty receipts. With fuel duty charged on a per litre basis, higher pump prices would reduce demand and hence receipts. With oil prices over $20 a barrel higher from 2010 onwards, higher oil prices take around £0.7 billion per year off fuel duty receipts

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24 March 2010