Exactly what Rachel Reeves’ hike to fuel duty would mean for you – from £43 MORE on petrol to increase in delivery costs
The move could even have unintended consequences for years to come
RACHEL Reeves is widely expected to reverse the 2022 cut in fuel duty in the upcoming Autumn Statement on October 30.
The main rate of the tax has remained frozen for more than a decade in a victory for The Sun’s Keep It Down Campaign.
The coalition government locked the duty at 57.95p per litre of petrol all the way back in 2011.
Since then, the only movement has been a 5p cut to 52.95p under Boris Johnson’s administration to ease the burden on drivers at the height of the energy price crisis.
But the new Chancellor is set to reverse this reduction as the Treasury seeks to tackle a £22 billion “black hole” in the public finances.
It has even been suggested that Ms Reeves could tack on a further 5p increase to the main rate, which analysts suggest could raise as much as 25% of the missing money.
But the decision is more than an exercise in book balancing as it will have significant real-world impacts on Brits – here’s what it could mean for you.
Pump crisis
The most obvious impact of the decision would be to send pump prices skyward at forecourts across the country.
Motoring organisations like the RAC have already accused fuel retailers of failing to pass on the 2022 cut and there’s no indication they’d be slow to hike prices if it is reversed.
The Sun's 14-year campaign to freeze fuel duty
The Sun has backed drivers as part of the Keep It Down campaign with rates of fuel duty not rising since the start of 2011.
Former Chancellor of the Exchequer Jeremy Hunt earlier this year thanked Sun readers for helping him to make the case to freeze fuel duty in his last Budget.
The freeze meant drivers would not have to face a potential £100 rise in motoring costs as a result of a 12p per litre duty hike.
Our decade-long campaign fights on behalf of readers to freeze duty on petrol and diesel to help deal with rising living costs.
Mr Hunt said: “I know how much Sun readers are feeling the pinch right now.
“Whether you drive a van, a hatchback or a people carrier I know how much you need to be on the road.
“Keeping it down means hard-working people will have an extra £100 this year without having to cut down using their vehicle.”
Experts from estimate that just the elimination of the discount alone would send the average litre of petrol up from its current price of 134p to 145p overnight.
That’s about where it was during the worst depths of the cost of living crisis and would, according to their analysis, mean an extra cost of £43 a year to run a petrol car and £39 for diesel.
And with rumours of a rise above 2022 levels and steady increase in oil prices as events unfold in the Middle East, this burden could become even heavier than expected.
Supermarket sweep
It’s not just drivers who are hurt by increased fuel duty, though.
AA President Edmund King explained that it would also hit prices in shops as supply chain costs go through the roof.
A large proportion of UK businesses still rely on road haulage for deliveries, with extra expenses likely to be passed onto customers.
Mr King said: “Scrapping the 5p freeze in fuel duty would hurt everyone, not just drivers.
“Everything from the price of food in supermarkets to the delivery of social care within our communities is impacted by pump prices, and an unnecessary hike in fuel duty could make things worse.”
Gains and losses
A central mission of this new government has been to achieve economic growth – but raising fuel duty could well be seen as an anti-growth move.
Brits are only just emerging from a series of Bank of England interest rate hikes designed to take the heat out of inflation.
But this is done by reducing the circulation of money in the economy and the way to do that is to reduce economic activity.
While necessary to keep inflation down, high rates have the effect of disincentivising spending – a nail in the coffin of GDP.
Raising taxes can have the same effect as, the more money people funnel into the Exchequer, the less they have to spend on actual goods and services, which is what drives economic growth.
In trying to plug the apparent gaps in the finances, the Chancellor could risk putting a brake on the growth she hopes to use the extra cash to achieve.