Budget 2013

AA welcomes scrapping of fuel duty hike with relief rather than joy

AA welcomes scrapping of fuel duty hike with relief rather than joy

AA welcomes scrapping of fuel duty hike with relief rather than joy

With the ‘cost of living’ top of UK’s major concerns and volatile UK pump in the past 12 months, a fuel duty hike would have been the straw likely to break UK drivers’ budgets.

The Chancellor’s decision to scrap the proposed fuel duty hike in September is therefore very welcome and makes good sense, according to the AA.

Comment

Edmund King, AA president, said; “A September fuel duty hike would have been the last straw likely to break UK drivers’ budgets and would have led to a summer of discontent. Scrapping the fuel duty hike is a pragmatic move and will bring some relief at the pumps. Already 76% of AA members are cutting back on journeys, household expenditure or both, due to the high cost of fuel.

“With current fuel prices at 138.42 for petrol and 145.24 for diesel, drivers will welcome the scrapping of the fuel duty hike with relief rather than with joy. Prices are almost 5p a litre higher than when the Chancellor froze fuel duty in March 2011.”

The latest fuel price swing, through February and March 2013, peaked at 140p a litre. Had January’s scheduled 3p rise in fuel duty gone ahead, attracting an additional 0.6p in VAT, it would have propelled the UK average petrol price well beyond the current record price of 142.48p.

A September fuel duty hike would have been the last straw likely to break UK drivers’ budgets and would have led to a summer of discontent

Edmund King, AA president

As well as a backlash from families and businesses that rely on cars and other vehicles, the Treasury is very likely to have got less revenue. Such is the tightness of family budgets that, during the price surges of March and September last year, UK petrol consumption fell substantially.

Infrastructure

On infrastructure the Chancellor said that “we are spending more on new roads than in a generation” however detailed future plans will not be published until June. The AA still believes than more needs to be spent on road maintenance and pinch points. King added: “If we are spending more on new roads than in a generation then it is a poor reflection of a pot-holed and congested generation.”

Cost of living is top concern

In 20 years, the cost of living has moved from near the bottom of major concerns in the UK to the top, research among nearly 20,000 AA members has found.

In Wednesday’s Budget, the Chancellor gets the chance to inform drivers whether he intends to press ahead with a £7.64-a-month hike in petrol costs for a two-car family.

If September’s planned increase in fuel duty is implemented, the expected 3p increase and the 0.6p added in VAT will lift the cost of a 70-litre Ford Mondeo tank of petrol from £97.12 to £99.64 (based on the current average UK petrol price of 138.74p a litre).

In February, 19,859 AA members in an AA Populus survey were asked to rate the strength of their concern about nine key issues. Compared to a similar survey conducted in 1993 among 1,888 respondents, the importance attached to these major concerns has shifted to such an extent that the cost of living has moved from being the eighth biggest concern to the first and concern about road traffic accidents has dropped from third to eighth.

How much concern do you feel?

We asked "How much concern do you feel about the following issues compared to others in your life?"
(Results for “extremely or strongly concerned”)

Issue 2013 ranking 1993 ranking
Cost of living 1 (63%) 8
Health service 2 (63%) 4
Violent crime 3 (50%) 1
Education 4 (47%) 2
Unemployment 5 (43%) 6
Unhealthy food 6 (39%) 7
Drug abuse 7 (39%) 5
Road traffic accidents 8 (35%) 3
Traffic congestion 9 (29%) 9

the least the Chancellor can do is to announce that the September fuel duty hike will be shelved. This Budget must not bust drivers’ budgets

Edmund King, AA president

Comment

“The Chancellor must not drive more motorists to the wall on Wednesday. It is a sad reflection of the economic state of our nation that the ‘cost of living’ is now top of their concerns whereas it didn’t even make the top five 20 years ago,” says Edmund King, the AA’s president.

“Motoring makes up a significant proportion of the disposable income of millions of drivers and the least the Chancellor can do is to announce that the September fuel duty hike will be shelved. This Budget must not bust drivers’ budgets.”

AA Fuel Duty Factfile

Price breakdown of a litre of fuel

Petrol – latest average UK price 138.02p a litre, of which:

  • Duty – 57.95p
  • VAT – 23.00p
  • (Total tax = 80.95 or 58.7%)
  • Wholesale* - 51.25p
  • Margin/transport/etc – 5.82p

Diesel – latest average UK price 145.02p a litre, of which:

  • Duty – 57.95p
  • VAT – 24.17p
  • (Total tax = 82.12 or 56.6%)
  • Wholesale* - 55.10
  • Margin/transport/etc – 7.80p

(*Wholesale values from 14 days ago to reflect time taken to reach the pump. Source: fuelpricesonline.com)

Impact of 3.02p-a-litre fuel duty increase

  • With VAT, extra cost per litre of petrol or diesel is 3.6p a litre.
  • Refuelling a car: small car (50 litres) = + £1.80, Mondeo (70 litres) = + £2.52
  • Two-car family extra monthly cost (106.17 ltrs per car) = + £7.64

Fuel duty changes

23 March 2011 – 57.95
1 January 2011 – 58.95
1 October 2010 – 58.19
1 April 2010 – 57.19
1 Sept 2009 - 56.19
1 April 2009 – 54.19
1 December 2008 – 52.35
1 October 2007 – 50.35
2 July 1997 – 40.28

Treasury fuel duty receipts – financial years

2011/12 - £26.80bn from 50.60 billion litres of fuel
2010/11 - £27.26bn from 51.70 billion litres of fuel
2009/10 - £26.20bn from 52.83 billion litres of fuel
2008/9 - £24.62bn from 54.15 billion litres of fuel
2007/8 - £24.91bn from 56.17 billion litres of fuel
1997/8 - £19.46bn from 57.59 billion litres of fuel
1991/2 – £10.99bn from 63.40 billion litres of fuel

(Source: HMRC)   


(20 March 2013)