Osborne rules out fuel duty cuts in budget

Saturday, 25 February 2012 11:42

George Osborne is expected to ignore calls for a cut in fuel duty in next month’s budget, according to sources close to the Chancellor.

Mr Osborne is struggling to come up with money to fund the policies he wants to announce at the centre of his budget next month and it is expected that he will ditch a cut in fuel duty in favour of tax cuts for businesses and the extension of the tax-free personal allowance.

Mr Osborne will argue that he has extended help towards motorists by deferring a planned 3p rise in fuel duty from January to August and ended the ‘escalator’ system introduced by Labour whereby fuel duty increased by one pence above inflation.

The decision will anger motorists, hauliers and business groups as fuel costs are approaching a record high. Last week analysts Experian Catalist published research that revealed the price of diesel had reached 143.05 pence per litre and had overtaken the amount reached during last year’s Arab Spring.

Petrol and diesel prices are expected to beat these record prices in the coming weeks due to the weakness of sterling which has fallen by ten per cent against the dollar in the past nine months and the rising price of crude oil, the price of which is being affected by political unrest in the Middle East and Iran.

The President of the AA, Edmund King has written to Mr Osborne arguing that higher fuel duty has contributed to the cost of diesel rising by 25 per cent over the past two years with petrol prices up by 20 per cent over the same period. He said that this has influenced fuel consumption to drop by 1.9 billion litres in the first nine months of last year, resulting in the loss of just over £1 billion to the government in lost fuel duty.

Backbench conservatives MPs are calling for a budget that supports business through lower taxes and investment in infrastructure, whilst the Liberal Democrats want the Chancellor to increase the personal allowance as far towards their target of £10,000 as possible in next month’s budget.

George Osborne received a minor boost to his plans this week when the latest public sector borrowing figures were announced by the Office for National Statistics (ONS) that showed the UK recorded the largest monthly surplus for four years as government receipts grew by £7.75 billion more than government expenditure in January and took the overall deficit back down below £1 trillion.

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