Taxation

Autumn Budget: Rising Prices And E10 Make A Strong Case For Cutting Fuel Duty

By 25th October 2021 No Comments

Some drivers claim that 10% ethanol in petrol (E10) reduces mpg and the price of ethanol seems to have added to rising fuel prices, which could be heading for a record high (1).

ABD research shows that super unleaded E5 (5% ethanol) petrol costs 7p to 23p more per litre than E10, which is incompatible with around 600,000 older cars in the UK owned by less well-off drivers.

ABD Spokesman Paul Biggs said: “Rising petrol and diesel prices at the pumps have been compounded by the introduction of E10 petrol, which has also forced drivers of older cars to buy the more expensive E5 super unleaded. Whilst a continued freeze on fuel duty would be welcome there is clearly a strong case for a substantial cut as the Treasury is benefitting from increased tax revenue due to the increased pump prices. Rishi Sunak should resist economically illiterate calls for an increase in fuel tax.”

Around 60% of the cost of petrol/diesel at the pumps is comprised of fuel duty and VAT. It’s worth reminding ourselves about the positive economic benefits of the fuel duty freeze as explained in the recent Centre for Economic and Business Research (CEBR) report:

The key findings (2) of the Fair Fuel UK and RHA commissioned CEBR report (3) include:

• Any rise in fuel duty would generate very little revenue.
• A 2p rise in fuel duty would create economic damage, cutting GDP by about £600 million and reducing employment by about 8,000 jobs. It would add 0.6% to the CPI (inflation).

• A rise in fuel duty would hit the poorest motorists most. Motorists in the poorest 10% of the population spend proportionately twice as much on fuel as the richer groups. A rise in fuel duty is regressive.
• CEBR research has shown that the policy of freezing fuel duty, in place since 2011, has been highly successful, reducing the CPI by 6.7% compared with where it would have been and boosting household expenditure by £24 billion. With a policy that has proved successful, it would be bizarre to change it.

Let’s not miss the opportunity to help hard pressed drivers and the economy.

ENDS

Notes for Editors:

(1) Petrol is heading to an all-time record:

https://www.dailymail.co.uk/news/article-10118719/Greener-fuel-causes-soaring-prices-pumps-experts-warn.html

(2) Summary of CEBR Report:

https://cebr.com/reports/the-impact-of-imposing-an-additional-2p-on-fuel-duty/

(3) Full CEBR Report:

https://fairfueluk.com/CEBR-Fuel-Duty-Impact—Nov-2020/2/

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