Fuel duty freeze backed by The AA

The AA is calling for a continuation in the freeze on fuel duty ahead of the budget in October.

It says the move will protect household budgets, the voluntary care sector, the wider economy and drivers.

This call was part of The AA’s Motoring Manifesto which was sent to all parties pre-election and stated that the current freeze on duty should be retained as global prices remain volatile and any increase will hit individuals, businesses and fuel inflation. The AA concludes that nothing has changed since the result of the election.

Edmund King, AA president. said: “Scrapping the 5p freeze in fuel duty would hurt everyone, not just drivers. Everything from the price of food in supermarkets to the delivery of social care within our communities are impacted by pump prices, and an unnecessary hike in fuel duty could make things worse.

“The AA understands the wider impact any rise in fuel duty has on the wider economy. Household budgets are already stretched and everyone benefits from a temporary suppression in fuel duty. Even households without a car feel the benefit of discounted fuel duty through cheaper bus fares and more affordable goods from supermarkets.

“Much has been made of the margin of fuel retailers, and while there are examples of some outlets collecting higher than necessary profits, most small and independent forecourts are struggling to keep their heads above water compared to 2017. The best way to ensure fair pump prices is to complete the initial good work of the Competition & Markets Authority (CMA) to legislate that all fuel retailers must publish their prices.

“We don’t deny there are tough choices for the Chancellor to make in October, but hiking fuel duty could backfire on working people and fuel inflation. The recent National Travel Survey shows that outside of London, 70% commute by car to work and this increases to 81% in rural areas. The car remains an essential form of mobility and affordable road transport is essential to the health of the nation.”

HMRC Hydrocarbon Oils Bulletin data shows the UK consumed 46.4 billion litres of petrol and diesel in the last financial year. A 5p increase in fuel duty would switch more than £2.3 billion from potential consumer spending to the Treasury – and that’s before adding the additional 1p per litre in VAT that would be added to a 5p fuel duty increase. The extra fuel duty paid by haulage and other commercial activity would be passed on to customers.

As it is, the Government enjoys a 20% VAT from the majority of consumer spending on private transport. That includes £57.4 billion spent on the purchase of cars and £78.6 billion spent on the ‘operation of personal transport’ in 2023, according to the ONS. By far the majority of spending on the last category will have been on cars.

Evidence from The AA, academic research and a volunteer sector losing essential private drivers by the day, paints a picture of "devastating" impact on the economy and society’s most vulnerable if fuel duty goes up in the budget.

Research carried out last month shows that low income households will be the hardest hit if the Chancellor increases fuel duty, where more than half (55%2) say they are worried about the price of fuel in general, while more than two fifths (45%) say they are concerned about a prospective rise in fuel duty.

This concern is backed up by academic research from East Anglia University that shows less well-off households spending as much as 20% to 30% more of their disposable income on petrol.

Economically, the impact is not only from higher transport costs pushing up consumer prices, and therefore fuelling inflation, but the siphoning off of potential consumer spending into the Treasury’s coffers. This does not help economic growth the Government says it wants to revive.