10p fuel duty cut proposed as motorists face rising pump prices
Motorists could receive a temporary 10p-a-litre fuel duty cut under proposals aimed at cushioning households and businesses from rising petrol and diesel costs.
By BBC News
Motorists could receive a temporary 10p-a-litre reduction in fuel duty under proposals intended to provide relief from rising petrol and diesel prices.
Liberal Democrat leader Sir Ed Davey is calling for the Government to introduce the emergency reduction immediately and keep it in place until Christmas.
His party estimates that reducing fuel duty by 10p would translate into a reduction of around 12p a litre at the pump once VAT is taken into account.
The eventual saving for motorists would depend on how changes in tax, wholesale fuel prices and retailers’ margins feed through to forecourt prices.
The proposal comes as disruption to global energy supplies has pushed oil prices above $100 a barrel, increasing pressure on petrol and diesel prices.
Fuel duty is currently charged at 52.95p per litre on standard petrol and diesel.
That rate reflects a temporary 5p reduction first introduced in March 2022 following a surge in energy prices.
The cut has repeatedly been extended and is currently scheduled to remain in place until the end of December 2026.
Under existing legislation, fuel duty is due to begin returning towards its previous level from January 2027, although the Government has said final rates will be confirmed at the Budget.
Davey wants the Government to abandon that planned reversal as well as introducing the additional temporary 10p reduction.
The Liberal Democrats estimate their emergency measure would cost approximately £2 billion.
The party argues that part of the cost would be recovered through additional tax receipts elsewhere, including revenues linked to higher energy company profits and economic activity.
That claim is the party’s own assessment and the eventual cost to the Treasury would depend on factors including fuel consumption, oil and gas prices and wider economic conditions.
Fuel prices have become an increasingly important cost-of-living issue as disruption to international energy markets feeds through to transport costs.
Higher diesel prices are particularly significant for businesses because road haulage and delivery costs can ultimately affect the prices consumers pay for goods.
For households, the effect varies considerably according to how much they drive.
A 12p reduction in the pump price would save £6 on a 50-litre fill-up if the full reduction were passed on.
A household buying 100 litres of fuel a month would save approximately £12 at that level.
Davey’s wider proposals include reducing England’s bus fare cap from £3 to £1 and cutting rail fares by 10%.
He is also calling for VAT on public electric vehicle charging to be removed.
Electricity supplied through public EV chargers currently attracts the standard 20% VAT rate, while domestic electricity is generally subject to 5%, creating a significant difference for drivers who cannot charge their vehicles at home.
The Government has not committed to adopting the Liberal Democrat proposals.
Decisions over fuel duty will form part of the wider debate ahead of the Budget, when ministers are expected to set out the future tax treatment of petrol and diesel.
For motorists, the immediate issue is increasingly being driven by international oil markets.
If crude prices remain elevated, pressure on forecourt prices could continue regardless of the political debate over fuel duty, making the amount of tax charged on each litre increasingly important to household and business transport costs.