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Thursday, 17 April 2014


Are the government finally admitting fuel duty reductions are GOOD for the economy?

A new treasury report (read the full report here) released this week has concluded the cost of reducing fuel duty could be offset by the economic boost it brings.

Released by George Osborne’s office, Analysis of the dynamic effects of fuel duty reduction concludes that the recent reductions in fuel duty (in real terms) caused by the chancellor’s cancellation of planned fuel-duty rises will increase GDP by between 0.3 and 0.5 per cent in the long-term, about £7.5billion in today’s prices.

The modelling suggestions lower fuel prices will lead to increased profits within the transport sector, which would then have a knock-on effect on wages and consumption, which will ultimately all add to higher tax revenues. As a result of all of this, the cost of the policy falls by between 37 and 56 per cent in the long-term.

The Freight Transport Association (FTA) applauded the Chancellor’s position with FTA’s Chief Executive Theo de Pencier stating: "FTA is pleased that the Treasury has accepted our key arguments that fuel duty can be cut without harming the economy. From the conclusions in this report today, it does appear as though the Chancellor has caught-up with our findings, and there is now every chance for him to go further and boost growth by cutting 3 pence per litre from current rates.”

The Road Haulage Association echoed these comments with Directory of Policy Jack Semple commenting: “The important thing to ensure now is that this economic and tax reality becomes imbedded as core Treasury and political thinking as we look ahead to the next Parliament.”

Fuelwatchdog.co.uk says:


This is welcoming news for the UK motorist, but British rates of fuel duty still remain the highest in Europe so it will be interesting to see if government policy changes enough to ensure our rates fall in line with the rest of the EU.

We mustn’t also lose sight of the fact that lower fuel prices won’t do anything to help improve the environmental impact of driving vehicles; in fact it could almost do the opposite by encouraging people to drive more. The real long term solution does still need to come from the government, but more in the way of incentives and grants to make new and emerging vehicle technologies more accessible to the average motorist.

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