Money News
The cost of motoring may not be coming down but at least it won't rise quite as quickly as it would have done. The Chancellor of the Exchequer, Alistair Darling MP, has postponed the 2 pence per litre increase in fuel duty that was due to take place on 1 October 2008. This holds the main road fuel duty rates at 50.35 pence per litre after 1 October this year.
The Treasury has pointed out that fuel duty is 17% lower in real terms than in 1999. If fuel duty had risen in line with inflation since the end of 1999 it would now be around 60 pence per litre, and if it had risen in line with the escalator it would be close to 80 pence per litre.
Planned increases in road fuel gases, biofuel duty rates and rebated oils rates will also be postponed. Alistair Darling said, "The global credit crunch and sharp rises in world oil prices have pushed up prices at the pump. Todays decision will help motorists and businesses get through what is a difficult time for everyone."
The announcement had been widely anticipated in the light of the high level of oil prices. The move had already been postponed from April. Jonathan Loynes, chief economist and Capital Economics says the effects on both inflation and the public finances will be very small.
"At the most, it will cut 0.1% from the inflation rate, which is negligible compared to the wider upward contribution (currently 0.9%) from petrol prices. Meanwhile, the lost tax revenue will amount to about £0.5bn this year, which will be much more than offset by the rise in North Sea revenues resulting from higher oil prices - note that the Budget projections were based on an average oil price of just $84 per barrel."
17 July 2008 © Moneyextra.com
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