Fleet World Workshop Tools
Car Tax Calculator
CO2 Calculator
Van Tax Calculator
BiK Rates Company Car Tax

Spring Budget 2023: RAC urges Chancellor to retain 5p duty cut

A rise in fuel duty in the Spring Budget could impact inflation and the wider economy, causing “untold damage”, the RAC has warned the Chancellor.

The average price of a litre of petrol and diesel was down 3p, saving drivers over a pound on a fill-up

Removing the 5ppl duty cut will not only hit struggling households and businesses but could also have a detrimental effect on inflation and the wider economy

With household finances under even more pressure than a year ago, it’s urging the Treasury to both keep the 5ppl duty reduction introduced a year ago and to cancel the annual fuel duty rise.

Office for Budget Responsibility documents released after the Autumn Statement revealed that the two changes combined would hike fuel duty 23% and mark a record cash increase, adding 12p to a litre of fuel.

And even if the Government just removes the 5ppl duty cut, which was only planned for 12 months, the RAC has said the increase in fuel prices would not only prove punishing to households and businesses struggling to make ends meet, but was also likely to further impact inflation.

RAC fuel spokesman Simon Williams said: “While we accept the 5p cut introduced last year can’t last forever, with household finances under even more pressure this spring than they were a year ago, we don’t think now is the time to be removing it.

“To decide to raise prices by 5p on both fuels would prove punishing to households and businesses struggling to make ends meet, and may have a detrimental effect on both inflation – which the Government is desperate to bring down – and the wider economy. In the case of diesel, it would also mean the UK has the highest fuel duty rate in the whole of Europe.”

He added: “We also hope Mr Hunt isn’t about to become the first Chancellor in 12 years not to cancel the annual planned fuel duty rise. If he were to go ahead with it, untold damage could be caused.”

Latest RAC data shows that fuel prices fell for the fourth consecutive month in February, yet diesel drivers continue to be overcharged at the pumps.

February saw the average price of a litre of unleaded come down another penny (1.26p) to 147.72p, while diesel dropped 3.19p to 167.19p. The falls drop the cost of filling a 55-litre family petrol car to £81.25 (down £0.69 from £81.94 a month earlier), and the diesel equivalent £91.95 (down from £93.71 at the start of February).

But it says diesel is priced significantly higher than it was 12 months ago, despite wholesale prices being almost identical. This indicates a change in retailer pricing behaviour.

Earlier this week, the RAC warned diesel drivers are being hit by an extra 20p a litre for fuel compared to petrol drivers, despite there being just a 6p difference between the wholesale prices of both diesel and petrol throughout all of February. This means anyone filling a diesel car is, the RAC calculates, paying around £7 more per tank than they should be if diesel was being sold at a fairer price of around 155p a litre.

The RAC says retailers are subsiding petrol prices by charging more for diesel and the Competition & Markets Authority (CMA) has also expressed concerns over diesel pricing. Its initial findings of a review into the fuel retailing sector, published in December, found that drivers had been hit by so-called ‘rocket and feather’ pricing on road fuel last year – particularly for diesel – and that it had been the most volatile 12 months for fuel prices on record.

The RAC’s Simon Williams added: “Retailers really ought to demonstrate they’re on the side of drivers by cutting their diesel prices now – not least as the wholesale price is on a par with where it was 12 months ago, yet the price they’re charging drivers at the pumps remains needlessly high.”

For more of the latest industry news, click here.

Natalie Middleton

Natalie has worked as a fleet journalist for over 20 years, previously as assistant editor on the former Company Car magazine before joining Fleet World in 2006. Prior to this, she worked on a range of B2B titles, including Insurance Age and Insurance Day.