RAC reaction to Spring Statement announcement that fuel duty will be cut

RAC reaction to Spring Statement announcement that fuel duty will be cut
Today, Chancellor of the Exchequer Rishi Sunak gave his Spring Statement to the House of Commons, where he discussed the rising fuel prices and cost of living impacting people across the UK.

For RAC members, the key point from today's statement is that Fuel duty will be cut by 5p per litre until March 2023.

Sunak stated: "I want to help people now. So I’m announcing three immediate measures. First, I’m going to help motorists. Today I can announce for only the second time in 20 years, fuel duty will be cut. Not by 1, not even by 2, but by 5 pence per litre. The biggest cut to all fuel duty rates – ever.

"And while some have called for the cut to last until August, I have decided it will be in place until March next year – a full 12 months. Together with the freeze, it’s a tax cut this year for hard-working families and businesses worth over £5 billion. And it will take effect from 6pm tonight."

However, it has been reported that even though may be the biggest cut 'ever' to fuel duty - the average price of petrol is more than 40p higher than it was during the 2021 Spring Statement - meaning that the Government is stil making more per litre than it was a year ago. This is the same story for diesel, which is almost 50p higher than it was 12 months ago.

Reacting to the Chancellor's announcement made this lunchtime, RAC head of policy Nicholas Lyes said: "With petrol and diesel prices breaking records almost daily, and the cost to fill up a petrol car at over £92 and a diesel at nearly £100, we’re pleased to see the Chancellor has given drivers some much-needed relief at the pumps, but the reality is that a 5p cut in duty is something of a drop in the ocean. In reality, reducing it by 5p will only take prices back to where they were just over a week ago.

"With the cut taking effect at 6pm tonight drivers will only notice the difference at the pumps once retailers have bought new fuel in at the lower rate. There’s also a very real risk retailers could just absorb some or all of the duty cut themselves by not lowering their prices.

"If this proves to be the case it will be dire for drivers. It also wouldn’t be totally unexpected based on the biggest retailers not reducing their prices late last year when the oil price fell sharply.

"Temporarily reducing VAT would have been a more progressive way of helping drivers as the tax is applied at the point the fuel is sold, removing any possibility of retailers taking some of the tax cut themselves to increase their profits.

"It’s also the case that the Treasury is benefitting hugely from the high fuel prices because of greater VAT revenue. The Chancellor is currently getting 28p a litre VAT on petrol and 30p on diesel – this of course comes on top of fuel duty as VAT is a tax on a tax."

For more on petrol and diesel prices, check RAC Fuel Watch.

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