British motorists will save £100 on average after the government retained a 5p per litre discount on fuel duty for a further year, prompting warnings from carmakers and public transport campaigners that the move would slow the uptake of electric vehicles.
The measure, which was introduced last year to help offset the soaring cost of petrol and diesel in the wake of Russia’s full-scale invasion of Ukraine, will cost the Treasury more than £5bn. Prior to that, successive Conservative chancellors have frozen fuel duty since 2011.
“Because inflation remains high, I have decided now is not the right time to uprate fuel duty with inflation, or increase the duty,” said chancellor Jeremy Hunt.
The levy is worth 52.95p per litre, and is the largest single element of the price of fuel, followed by wholesale fuel costs, and VAT, according to the RAC.
The extension of the discount was welcomed by motoring groups. “The cut has given drivers some much-needed relief in what has been the most torrid year ever at the pumps, with price records being broken even after duty was cut,” said Nicholas Lyes at the RAC. “Given the importance of driving for consumers and businesses, duty should be kept low to help fight inflation.”
But the car industry, which received little attention in the chancellor’s Budget on Wednesday, warned that the extension of the discount would make it harder to meet electric vehicle sales quotas that come into force next year.
Mike Hawes, head of the Society of Motor Manufacturers and Traders, said the £5bn giveaway contrasted “with an absence of measures to boost uptake of zero-emission vehicles, such as reducing VAT on public charging”.
The industry had urged the government to reduce the rate of VAT charged on public electric charging points to encourage the take up of zero-emission vehicles.
Ian Plummer, commercial director at online marketplace Auto Trader, said: “One thing [the fuel duty cut] won’t do is encourage demand for electric vehicles, even though the 2030 ban on sales of new petrol and diesel cars looms ever closer.”
Electric vehicles accounted for 18 per cent of new car sales in February, but from next year new government targets will require each car brand to hit 22 per cent for zero-emission vehicle sales, or incur fines. Higher fuel costs make electric vehicles, which are often charged at home, more affordable by comparison.
Public transport advocates also criticised the fuel duty discount, arguing it would put people off using trains and buses. “Making driving relatively cheaper, while public transport gets more expensive, won’t help us reach net zero,” said Claire Harding, of the Centre for London. “Instead, we need more investment in public transport.”
Regulated rail fares rose 5.9 per cent this year, and overall the price of train tickets has jumped 33 per cent over the past decade, according to the Campaign for Better Transport.
Andy Bagnall, chief executive of industry lobby group Rail Partners, said the policy would have the “unintended consequence” of making rail travel less attractive.
Motoring groups also welcomed the allocation of £200mn to help local councils fix potholes but said longer-term investment to address the state of Britain’s roads was needed.
“Years of under-investment in our road network coupled with a cold and wet winter is already unveiling the craters,” said Jack Cousens at the AA. “More money needs to be spent now, as well as significant long-term investment to improve our local roads.”