MHA | Spring Statement: cut in fuel duty is only a very modest boon…

Spring Statement: cut in fuel duty is only a very modest boon to hard-pressed consumers

March 23rd 2022
Petrol pump

Following the Chancellor’s announcement of a cut in fuel duty in today’s Spring Statement (23 March 2022), Jonathan Main, partner at MHA, says the benefit to households will be extremely modest given the trying circumstances, amounting to a mere £52 over 12 months:

“The 5p cut in fuel duty may save the average motorist a mere £52 over the next 12 months*. It will lower duty at the pump to 52.95p per litre and reduce the price of diesel by 6p per litre, including VAT. This is a pretty modest saving and of course only of any use if you own a car. If circumstances were less challenging we could hail this as a progressive step, however, considering the current times, it is not.

“Indirect taxes such as VAT, fuel duty, alcohol and tobacco duties disproportionately impact the poorest consumers, as a far larger proportion of their income is used on items subject to those taxes. However, at present, with inflation forecast to increase to 10%, fuel prices already up by 50%, and domestic energy about to rise by the same amount, the challenge for poorer households is too acute for trimming 5p off fuel duty to make much difference. Increasing benefits or the national minimum wage, reducing income tax or delaying personal tax rises are much more likely to have a meaningful impact. These should have been the focus for the Chancellor today.”

*Based on average pre-Covid-19 mileage of 7,400 miles per year and average fuel consumption across petrol and diesel of 38.8mpg (miles per gallon).

This article is a part of our dedicated Spring Forecast Statement hub. For more analysis and insight, please click here.

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