AA urges Chancellor to keep 5p fuel duty cut and go further
The AA is calling on the Chancellor to protect the existing 5p fuel duty cut at the Budget on 28 October. It also wants the Chancellor to go further and cut duty by another 5p per litre.
In a letter ahead of the Budget, the AA warns that reversing the current reduction would put more pressure on drivers. Pump prices have already risen sharply. The AA wants the 5p cut maintained and a further 5p-per-litre reduction introduced.
What the extra cut would save drivers
Once VAT is included, the additional 5p cut would be worth around 6p per litre at the pump, if retailers pass it on in full. That would save approximately £3.30 when filling a typical 55-litre tank.
The gap grows if the existing reduction disappears. Compared with letting it expire and making no further cut, a driver filling a 55-litre tank would ultimately be around £6.60 better off.
The call comes as drivers continue to face high pump prices. AA analysis of the Government’s Fuel Finder data found that 2,577 filling stations out of approximately 8,000 were charging £2 per litre or more for diesel at the beginning of October.
Why fuel prices matter to fleets and businesses
The AA says action on fuel duty would not only help drivers. It could also help businesses contain costs and limit wider inflationary pressures. Higher road fuel prices increase the cost of moving goods, making deliveries and providing services.
Hauliers, tradespeople, delivery companies, retailers and service providers all face higher costs when petrol and diesel prices rise. Those costs can ultimately reach households through higher prices in the shops.
The VAT windfall
The AA is also asking the Treasury to account for the additional VAT revenue it receives as underlying fuel prices increase when it costs a further reduction in fuel duty.
The Treasury has already made an extra £374 million in VAT from consumer spending on buying and maintaining cars in the first six months of this year, compared with January to June last year. Over that half year, consumers spent £35.526 billion on buying cars and £43.429 billion on maintenance, which is mostly for cars. That adds up to £78.955 billion in spending and a VAT haul of £13.159 billion.
Edmund King, AA president, said: “Drivers need the Chancellor to put the brakes on rising fuel costs. The first step must be keeping the existing 5p fuel duty cut, but with prices rising we believe the Chancellor should go further and cut another 5p. If passed on in full, that additional cut would take around 6p off a litre at the pump and save around £3.30 when filling a typical family car.
“Allowing the existing cut to disappear would take drivers in precisely the wrong direction. Compared with that outcome, keeping the 5p reduction and going 5p further could make a difference of around £6.60 on a tank.
“Fuel prices aren’t just an issue for motorists. Higher prices increase the cost of moving goods, making deliveries and running businesses, with those costs ultimately finding their way into household bills.
“As underlying fuel prices rise, the Treasury also receives more VAT. We believe the Chancellor should take that additional revenue into account and use the Budget to give drivers and businesses some breathing space.”
The AA’s two fuel duty asks
In short, the AA wants the Chancellor to do two things on fuel duty. First, maintain the existing 5p-per-litre reduction. Second, cut fuel duty by a further 5p per litre.
The additional reduction would equate to approximately 6p per litre at the pump once VAT is included, if passed on in full. That would save approximately £3.30 on a 55-litre tank. Compared with allowing the existing reduction to disappear and taking no further action, the difference would be approximately £6.60 on a 55-litre fill-up.
