AA Questions Government on "Missing" Transport Funds

7 March 2008

The Government should scrap the proposed increase in fuel duty at the Budget next week and come clean about reneged promises to ring-fence real term increases in fuel duty for roads and transport, according to the AA today.

The AA raised the fuel duty issue at a meeting with the Exchequer Secretary to The Treasury earlier this week and pointed out that diesel is 20p per litre more expensive today than the same time last year.

In 1999 Gordon Brown committed to putting any "real terms" fuel duty increases into a ring-fenced fund for improving public transport and modernising the road network. The AA questions whether this fund exists and where the money is being spent. In October 2007 fuel duty was increased by 2p per litre, a 4% increase on 50p per litre fuel duty. Inflation has been running at approximately the Government's target of 2% so the difference should go to a ring-fenced fund according to the AA.

The AA rejects Treasury claims that the real term increase should be cumulative since 1999.

"This is like saying the general election next year will only be valid if it takes into account the results of all others since 1997 or that the Premier League table at the end of the season should be averaged out since the premier league begun" said AA president, Edmund King.

The AA accepts that the Government has pointed out that "by 2010 main fuel duty rates will still remain 11% lower in real terms than they were in 1999"1 but feels that this is irrelevant when set alongside record global and pump prices. The Government's tax take as a proportion of the pump price may have reduced but the motorist is more concerned about the total price which includes the highest duty levels in Europe. In the years when duty has increased above inflation the AA believes that this amount should have been ring-fenced for transport.

With the global price of oil hitting record highs of $103 per barrel and diesel hitting £5 per gallon, there are no signs of prices dropping significantly before the summer.

Commenting, Edmund King, AA president, said: "All road users are suffering from record pump prices. Perhaps the resentment felt by motorists would not be so great if people could see the Government was ploughing more of the revenues into ring-fenced transport funds as promised by Gordon Brown back in 1999. High fuel taxes would be more palatable if there was higher transport spending. At present many motorists see themselves as wallets on wheels always paying out without getting much back."

The AA has also warned government that although announcements on Vehicle Excise Duty were made last year that many motorists will still be shocked if these increases go through. "Many drivers of Band G vehicles will be shocked to see the cost of their tax disc increase to £400", said King

Notes to editors

Extract form Pre-budget report 1999,

6.62 The Chancellor has decided that the revenues from any real terms increases in fuel duties will, in future, go straight in to a ring-fenced fund for improving public transport and modernising the road network.

1Letter to the AA President from the Exchequer Secretary to the Treasury (5 February 2008)

AA updated petrol prices

  • 4 March 2008: petrol 105.70 pence per litre, diesel 111.59 pence per litre
  • 4 March 2007: petrol 88.32, diesel 91.77
  • Difference: petrol 17.38 pence, diesel 19.82 pence
  • Extra cost to fill up 50-litre tank: petrol £8.69, diesel £9.91