Will Govt Cut Tax On Fuel?

Tue 15th Mar 2022

Two of the UK’s biggest motoring organisations appear to be at odds over whether Chancellor Rishi Sunak will cut fuel tax to relieve some pain at the pump for drivers.

With the petrol and diesel prices spiralling out of control due to the crisis in Ukraine, there are many hoping that the government will take action as prices threaten to hit an unprecedented £2 a litre.

Motorists are now paying more than £20 extra to fill up an standard family car than they did 12 months ago, and with Prime Minister Boris Johnson promising to phase out Russian oil, the problem is unlikely to disappear anytime soon.

While many other European nations have cut fuel duties to east the burden on the public, the UK government has remained tight-lipped on its own plans, however Rishi Sunak may get the opportunity to make cuts when he makes his mini-budget announcement later this month.

But the RAC and the AA appear to disagree on how the tax cut should be made - should it be fuel duty or VAT that is lowered?

“The Chancellor needs to act now to cut VAT to save homes and businesses from untold financial pain,” said Simon Williams, fuel spokesman for the RAC.

“Mr Sunak also needs to be prepared to go further if prices continue to rise as expected, after all it doesn’t seem fair that the Government’s coffers should benefit from the hike in the oil price while drivers suffer.”

But the AAs Luke Bosdet believes that a cut on VAT is unlikely, and that instead drivers will be reminded that fuel duty has been frozen at 57.95p a litre for the last 11 years. Bosdet also argues that a cut on VAT could lead to requests for the same measures across other industries.

“The point that needs to be stressed is that drivers, who haven’t started using really simple eco-driving techniques, can easily save the equivalent of 9p-a-litre - today,” Bosdet said.

“That’s primarily because the transition from winter to spring driving improves mpg significantly. An extra three miles to the gallon is almost guaranteed for most.”