Tory plan to link duty to oil cost

The Conservative Party has unveiled radical plans to slash fuel tax to help families cope with soaring prices.

The move, announced by shadow chancellor George Osborne, would see fuel duty linked to the level oil prices to ensure that the Government "shared the pain" of hikes and "shared the gain" of falls.

Had the move been put into place at the last Budget it would have seen 5p cut off the price of a litre of petrol or diesel.

However the Government branded the Tories "dishonest", claiming that the policy would cause a "massive hole" in the public finances.

"Either George Osborne doesn't understand the way tax revenues work, or he's prepared to play fast and loose with the public finances for the sake of a good headline," said Treasury minister Kitty Ussher.

"It is far from clear that there will be a net gain to the public finances from the higher oil price."

Speaking on BBC1's Andrew Marr programme, Mr Osborne called the Fair Fuel Stabiliser as a "totally different approach".

"What this would mean is that when the price of oil goes up the fuel duty comes down to help families," he said.

"But the quid pro quo is that when the price of oil falls the duty goes up. So Government is sharing the pain of rising oil prices, but Government is also sharing the gain when oil prices fall."

The system would take Treasury predictions for oil prices as a "base" - and fuel duty would then be altered if they proved wrong.

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