Fuel duty

Any increase in fuel duty will hit poorer drivers hardest

14 November 2011

Any increase in fuel duty will hit poorer drivers hardest

Any increase in fuel duty will hit poorer drivers hardest

Rising fuel duty is becoming a socially-divisive tax that is splitting the nation into the ‘drives’ and ‘drive-nots’ during the economic downturn. Lower-income and rural drivers are losing mobility faster than better-off motorists.

MPs are due to debate fuel duty rises on 15 November and the Chancellor’s autumn statement is on 29 November.

The AA has written to the Chancellor to urge him to revert back to the old system of setting annual fuel duty, which takes into account current economic and social conditions – not an automatic turning of the screw based on inflation.

CPI not RPI

The AA has also called on the Chancellor to use the Consumer Price Index, not the Retail Price Index, as the inflation indicator for fuel duty considerations.

The Treasury needs to end the vicious circle of fuel duty increases pushing up RPI which can then boost the inflation rate for the next fuel duty rise.

As it is, drivers already pay more VAT on fuel duty (adding 0.6p to the 3.02p duty increase on 1 January) rises at the pump.

business and households should be given a break from the annual cycle of fuel duty increases

Edmund King, AA president

Dear Chancellor

In the letter to the Chancellor, the AA’s president Edmund King wrote: “The private car is, for most people, a necessity not a luxury.  It is their means to a job, health care, doing the shopping, visiting relatives and friends and also for improving the quality of their lives. 

“We were disappointed that the January fuel duty rise went ahead at a time of rising oil prices and higher VAT. The AA firmly believes that business and households should be given a break from the annual cycle of fuel duty increases. 

“Motorists do not understand the logic of high fuel duty rises which further increase RPI and force demand down at a difficult time for family and business budgets which need mobility to stay afloat.

“Although we fully recognise the need to balance the books we also believe the time has come for activity to be stimulated through lower pump prices.”

AA/Populus research

Measuring how regressive fuel duty increases have become, AA/Populus research shows that less well-off drivers have suffered more since the price of fuel peaked at 137.43p a litre for petrol and 143.04p for diesel. Petrol has since remained within 3p of that record.

After May’s record prices, an AA/Populus survey of 11,548 AA members found that those cutting back on car use, other spending or both rose dramatically with lower income:

May 2011:  AB 70%, C1 77%, C2 83%, DE 84%

In July 2011 another AA/Populus survey exposed the knife-edge that lower-income drivers endure budgeting on a set amount on fuel. Of the 28% who say they spend a set amount on fuel, the impact of pump prices that are 16p – 18p a litre higher than a year ago shows:

  • Increased the set amount: AB  22%, C1  25%, C2  27%, DE  15%
  • Not changed the set amount but driven less: AB  28%, C1  29%, C2  28%, DE  37%
  • Not changed the set amount but filled up less: AB  9%, C1  9%, C2  10%, DE  11%

(Budget a set amount on fuel: AB  21%, C1  31%, C2  40%, DE  44%)

AB = (higher or middle level managerial, administrative or professional position)
C1 = (supervisor or clerical position; junior managerial, administrative or professional position; self-employed; student living away from home)
C2 = (skilled manual or service worker)
DE = (semi skilled or unskilled manual or service worker; dependent on state benefits; unemployed for six months or longer; or state pensioner with no earnings).

(updated 11 November 2011)