26.6.2012 Govt scraps planned 3p rise in fuel duty

In a surprise announcement this afternoon, the Chancellor George Osborne has told MPs that the Treasury will not be going ahead with the planned 3p per litre rise in fuel duty planned for August and will freeze fuel duty for the rest of the year.

The Chancellor said: "This means that fuel duty will be 10p a litre lower than planned by the last Labour government. We are on the side of working families and businesses and this will fuel our recovery at this very difficult economic time for the world.

"The one-off cost of this change will be fully paid for by the larger than forecast savings in departmental budgets and we will set out details of those as usual in the autumn statement."

In March's 2012 Budget, the Chancellor had deferred of the 3.02 pence rise in fuel duty until August 2012 (from January 2012), and most commentators had expected this to go-ahead given the falling price of crude oil.

However, with fuel duty and pump prices being so crucial to many households and businesses, the Chancellor was obviously keen not to place any more weight on motorists, an may view the cancelling of a fuel duty rise as a way to stimulate the economy.

The 'fair' fuel duty stabiliser remains Government policy, which is designed to control fuel costs (as far as is possible) by avoiding automatic increases in fuel duty as long as oil prices remain high. Revenues lost by the introduction of the stabiliser are balanced by increasing tax on North Sea oil revenues. Any increase in fuel duty is only permitted when, and if, oil prices fall.

The Guardian