Rishi Sunak announced in his spring statement a cut to fuel duty that came into place at 6pm on the 23rd March 2022.
I'm here to tell you exactly what fuel duty is, what cut was made, how this will affect fuel prices and if this cut actually has any benefits at all.
So, let's start with the basics...
Fuel duty is yet another tax we (the UK) pay on the fuel we buy at the petrol station pumps. The amount that is charged varies from fuel to fuel, i.e. petrol, diesel, biodiesel and bioethanol are at 52.95p per litre, liquefied petroleum gas (LPG) at 28.88p per litre, Natural gas used as fuel in vehicles (e.g. biogas) is 22.57p per litre and fuel oil (oil for furnaces or heating) is 9.78p per litre
Oh, and VAT is then added to the cost of the fuel too!
The Government had cut fuel duty for petrol and diesel by 5p per litre across the whole of the UK for 12 months, and this came into effect at 6pm on the 23rd March 2022.
Overall, this is the biggest cut, in cash terms, that has ever been applied across all fuel duty rates at once.
This cut, plus the freeze in fuel duty in 2022-23, represents a £5 billion saving over the next 12-months, worth around:
£100 for the average car driver
£200 for the average van driver
£1,500 for the average haulier
Due to unique circumstances globally, including the war in Ukraine, fuel prices have been pushed up to unprecedented levels. This cut to fuel duty had been put in place to supposedly support motorists.
Cutting fuel duty will benefit anyone across the UK who uses fuel and represents savings for consumers worth around £2.4 billion over the next 12 months.
However, (as pointed out by Richard Murphy on Twitter) the 5p per litre cut is less than the increased VAT revenue paid on each litre of fuel now – effectively costing Rishi nothing to implement.
So essentially, there has been a cut to fuel duty by 5p, but the increased VAT revenue paid on each litre of fuel now basically cancels out any savings made, effectively making it pointless cut to implement.
Overall, not much. The cost of fuel has greatly increased, with drivers seeing a jump of around 11p per litre in March, then around another 22p per litre with the average pump price for petrol being ~£1.69 per litre and ~£1.79 per litre in diesel, with an average family car costing around £70-100+ to fill the tank.
At present there is no plan for the Government to increase the duties on fuel, although with the current crises in play (Russian war on Ukraine and the sanctions being levied on Russia, the world economy coming out of the Covid lockdowns and restarting the economy with very little reserves – possibly due to the ‘Just In Time’ production ethos prior to Covid) it is unfortunately highly likely to continue to rise as the oil refinery companies and distributors fight over the reserves!
Barring another worldwide economic slowdown (such as another Covid lockdown, in which we saw unleaded down to less than a £1.00 per litre at the pump!) it is unlikely for the foreseeable future.
I hope I have managed to cover most of the around the governments cut to fuel duty.
If you would like more information on how to budget in these uncertain times, please contact us via our website form.
