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UK Budget 2005

Rise in fuel duty postponed again

By Robert Wright, Transport Correspondent

Published: March 16 2005 16:38 | Last updated: March 16 2005 16:38

Motoring and trucking lobby groups welcomed the chancellor’s decision to postpone until September 1 an increase in road fuel duty, but environmental groups attacked a measure which will further increase the private car’s cost advantages.

The postponement is the third in a row, and the latest in a series of efforts to mollify motorists since the fuel price protests which brought chaos across the UK during 2000.

In the 2003, Budget the chancellor postponed an increase announced until October, and last year he postponed an increase from the Budget until September, only to cancel the increase altogether before it came into force.

The 2000 protests forced the government to scrap the fuel duty escalator, the mechanism introduced by the previous Conservative government under which fuel duty automatically rose annually by more than the rate of inflation in an effort to curb rising car use and carbon emissions.

The chancellor justified last year’s cancellation of the duty increase and this year’s postponement on the grounds that high oil prices are already creating enough problems for motorists.

The AA Motoring Trust said that petrol price increases in February and March alone had put up prices by 1.3p per litre – the proposed duty rise for this year is 1.5p per litre. Petrol price increases since the present surge in prices started a year ago had added £2 a week to the average motorist’s bills, the trust claimed.

However, the policy of scaling back fuel duty increases has long faced criticism from environmental groups and transport experts. The falling real costs of cars, their greater efficiency and long-term trends in petrol costs are all pushing the costs of motoring down, whatever the short-term trends, according to such groups. Motoring is consequently becoming cheaper while more environmentally friendly modes,such as rail and bus, are experiencing above-inflation cost increases.

Motoring costs have fallen by 6 per cent in real terms since 1997, while bus fares have risen nearly 16 per cent and rail fares 7 per cent, according to the Department for Transport.

David Begg, chairman of the Commission for Integrated Transport, said fuel duty had fallen 12 per cent in real terms since 2001.

“My view is that the policy of holding fuel duty down isn’t right, but I suppose the politics may be right,” said Mr Begg, who as a Labour councillor implemented initially unpopular measures to reduce road space in Edinburgh. “The policy doesn’t stack up because we’re facing a 20 per cent fall in motoring costs in the UK in the next decade and we know over that same period that public transport fares are likely to rise.”

That price divergence was incompatible with government policy aimed at changing people’s transport behaviour, he said.

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