Money Blog: Why the Fuel Duty Climbdown Smacks of Cowardice
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Home » Money Blog » Recession Watch » Why the Fuel Duty Climbdown Smacks of Cowardice
Why the Fuel Duty Climbdown Smacks of Cowardice
By Nic Cicutti
Jul 16, 11:49 AM
Personal finance journalists are always supposed to welcome tax cuts.
It is, after all, genetically wired in our DNAs – so why is that I find myself totally unmoved, even cynical, about the announcement this morning by Chancellor Alistair Darling that he is postponing the 2p rise in fuel duty due to come into force in October?
When making the announcement the Chancellor said: “The global credit crunch and sharp rise in world oil prices have pushed up prices at the pump. Today’s decision will help motorists and businesses get through what is a difficult time for everyone.”
Well yes, it will help, although quite by how much is debatable. A typical UK motorist drives about 10,000 miles a year, on average, according to a government transport report a few years ago.
That equates to between roughly 1,000 and 1,200 litres of fuel petrol or diesel, assuming consumption of about 35-40mpg.
So the decision to postpone the 2p rise per litre in fuel duty equates to a saving of about £25 a year at most.
To be honest, I have saved several times that amount by driving more carefully in the past few weeks – and by a combination of walking and using public transport, where prices have still not risen to match the recent fuel increases.
To introduce a note of controversy here, if the stand-off between Iran and Israel escalates and fuel outlets become blocked, you can forget about 2p a litre increases – because petrol will cost at least £1 a litre more than it does today.
So why is Alistair Darling doing this? Frankly, because he has been forced into it by a baying media. The government is so unpopular that it will do anything to avoid even the smallest drop in its poll ratings. And if that means caving in on something as trivial as this, then so be it.
Except, of course, that this kind of money is not trivial to the government. Twentyfive pounds a year (£12 actually, because the rise is only being postponed for six months) does not mean much to us, but it does mean £500m will be lost to the Treasury’s coffers between October and April next year, and £1bn a year thereafter.
Scrapping this insignificant duty will put more pressure on the government to raise tax in other ways. And you can be sure they will look for other ways to squeeze us. The difference will be that unlike this measure – now binned – the next one won’t even have the benefit of being environmentally friendly.
What a crazy way to run the country.
User Comments
Dennis Price 16 July 2008, 18:49
Unfortunately we have government which is incapable of any new ideas other than bash the phlebs with a new tax . I believe the sooner we have a general election
and kick this lot out,the sooner the better. I am old enough to remember the previous Callaghan administration, it went down the tube the same way the current Labour lot are. Strikes ,Pay demands,Inflation and TAX ,TAX,TAX, etc,etc .Sounds familiar doesnt it?
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