Sunak cuts 5p fuel duty in spring budget

The Chancellor, Rishi Sunak, has cut 5p/litre from fuel duty as diesel prices stabilise but remain very high.

Alongside the fuel duty reduction, Sunak raised the National Insurance threshold by £3,000 a year and said there would be a future 1p reduction in income tax. With the annual inflation rate at 6.2% and rising fast, the Chancellor said the basic rate of income tax would be cut from 20p to 19p in 2024, while his £6bn national insurance initiative would offset the impact of across-the-board price increases.

The chancellor used his spring mini budget to announce an immediate fuel duty cut for motorists and a £330-a-year national insurance cut for the average worker struggling to make ends meet. VAT on energy efficiency products was cut from 5% to zero.

The Confederation of Passenger Transport reacted immediately: “Today’s cut in fuel duty will help bus and coach operators with increasing costs that all road users are experiencing. It also runs the risk though of being perceived as an endorsement of travelling by car at a time when we need to be moving journeys from cars to sustainable transport to stay on track for the country’s net zero goals.

“Therefore, it’s vital that today’s announcement is matched by the government loudly promoting bus and coach travel and ensuring it delivers on the ambitions of its National Bus Strategy to improve services across the country. This should start by ensuring buses are given priority for road space to make journeys quicker and more reliable to encourage sustainable travel choices.”

Commenting on today’s Spring Statement, Phil Hitchen, managing director of Belle Vue Manchester, said: “The 5p a litre saving on fuel is a godsend and the increase in the national insurance threshold is a welcome measure for lower earners. The zero VAT rating for greener homes is also encouraging.

“It was good to hear the chancellor state that the continued sanctions on Russia are working. This action appears to be having an effect, with the Russian markets almost closed and inflation there at 20 per cent. These actions might slow down their invasion of Ukraine.”

Alistair Aitken, Head of Sales at Passenger also cautioned that fuel duty cuts significantly benefit car travel: “The Chancellor’s announcement that fuel duty will be cut will no doubt be welcomed by many motorists, as unprecedented costs have put a severe strain on household incomes. But this does highlight a contradiction – we have just celebrated the anniversary of the National Bus Strategy, which aimed to transform the image and travellers’ engagement with buses. It states: ‘We want buses to be both tools of inclusion and the transport of choice.’

“The way in which the government has communicated about rising fuel costs to date has been concerning, as they have highlighted people’s dependence on cars. The fuel duty cut will therefore be seen as a way to get more people back on the road and using private transport. Yet this goes against what the National Bus Strategy has been trying to achieve – inspiring patronage on alternative modes of transport.

The RHA welcomed the Chancellor’s announcement of a 5p/litre cut in fuel duty having called for a cut to ease pressure on road transport businesses facing soaring costs.

Rod McKenzie, RHA Executive Director said: “This will help firms at a critical time but the Chancellor could have gone further and announced an essential user rebate similar to other countries for hauliers and coach operators. Today’s cut equates to a £2,000 per year saving on running a typical commercial vehicle.

“The Chancellor missed an opportunity to announce a rebate to relieve more pressure on businesses. We’ll continue to press the Government hard for this measure as firms grapple with huge operating cost hikes.”

Longer term, the RHA believes the Government should bring in an essential user fuel rebate for coaches and lorries to bring UK operating costs into line with our key European competitors.