Experts are calling for Rachel Reeves to end the freeze on fuel duty in the upcoming Budget, as it would have a “negligible” impact on inflation.
The Chancellor will unveil the Government’s financial plans and commitments on Wednesday, November 26, with a number of motoring policies potentially being changed.
The rate of fuel duty has remained frozen since 2011, while the previous Conservative Government introduced a 5p per litre cut in March 2022.
The cut was made in response to the Russian invasion of Ukraine, which sent global fuel prices soaring in the immediate aftermath.
Chancellor Rachel Reeves announced that she would extend the 5p per litre fuel duty cut until March 2026, in a decision that shocked many in the motoring industry.
A leading environmental campaign group is now calling on the Chancellor to axe the freeze on fuel duty to restore revenue and incentivise the shift to cleaner transport.
Analysis from Green Alliance shows that the rate of inflation would have risen by just 0.06 per cent if the Chancellor had raised fuel duty in line with inflation in the last Autumn Budget.
Steve Coulter, head of economy at Green Alliance, said: “Faced with a difficult Budget, the Chancellor must raise revenue, but she can also eliminate subsidies for harmful activities and do the right thing for the environment.
Chancellor Rachel Reeves has been urged to consider removing the freeze on fuel duty in the Budget
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PA
“She would tick all these boxes by reversing the 15-year failure to implement inflation-linked rises in fuel duty.”
The expert claimed that richer people had benefitted from the freeze more than most other drivers, in addition to “substantially” increasing pollution rates.
While the RAC does not anticipate any major changes to fuel prices in the near future, its Fuel Watch tool shows that drivers are paying 135.33p per litre for unleaded and 142.91p for diesel.
Any reversal of fuel duty policies would push these prices higher, although it could coincide with the introduction of the Fuel Finder tool.
This will require all filling stations across the UK to report petrol and diesel prices and the unavailability of fuel within 30 minutes of a change.
Forecasts from the Government suggest that the tool could help drivers save between one and six pence per litre, with hopes it will be introduced before the end of the year.
The fuel duty freeze since 2011 is estimated to have cost around £100billion, according to the Office for Budget Responsibility.
Further analysis from Carbon Brief showed that carbon dioxide emissions across the country from road transport were 24 per cent higher in 2022 than they would have been if fuel duty had risen in line with inflation.
A DESNZ spokesperson confirmed to GB News that Fuel Finder is ‘on track’
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PAResearchers from the organisation added that ending the fuel duty freeze is better than other options, including the proposed pay-per-mile car tax measures for electric vehicle owners.
Reports suggest that the Government is planning to charge motorists three pence per mile to travel, in addition to Vehicle Excise Duty taxes.
Experts, including those from the Green Alliance, have warned that any tax changes could seriously undermine the transition to electric vehicles over the coming years.
The independent think tank pointed to sales data from New Zealand and Iceland, which saw new electric vehicle registrations drop after introducing similar road pricing schemes.