Chancellor George Osborne has announced that fuel duty is to remain frozen until at least the end of the current parliament in May 2015, with the next planned rise delayed until at least September, according to the Office for Budget Responsibility (OBR).
Some motoring groups had predicted an early return of the fuel duty escalator, the government’s system for increasing costs by the level of inflation plus 1p per litre. Had the escalator returned it would have led to almost immediate increases, with the government looking to take advantage of the recent fall in oil prices.
However, Mr Osborne said that he was ‘freezing fuel duty to help hardworking people be more financially secure.’
‘Despite falling fuel prices let me make this clear; we’ve cut fuel duty and we will keep it frozen.’
Duty on unleaded petrol and diesel will remain at a cost of 57.95 pence per litre. It’s remained at this price point since the government first scrapped the escalator and introduced a ‘fair fuel stabiliser’ in 2011.
When the stabiliser was introduced, the government stated that a fall in oil price below $75 per barrel for a sustained period would lead to the escalator being re-introduced. Brent crude is currently trading at around $71 per barrel.
The OBR also announced that from April 2016 onwards, rate rises would stay in line with Retail Prices Index (RPI) inflation. This will lead to receipts growth of 2.5 per cent on average between 2016-17 and 2019-20.
Chief engineer at RAC, David Bizley, said:
"The negative impact of fuel duty on economic growth is now acknowledged by the Treasury.
"We had feared an early return to the fuel duty escalator system - a deeply unpopular practice which led to a series of fuel duty hikes - but, for now, it appears that is not going to be the case."
The Department for Transport (DfT) also announced it is set to trial fuel signs in motorway petrol stations early in 2015, the aim being to ensure that drivers can see the cheapest places to fill up, and to foster more competition between service stations. There is currently no date set for the trial.
Transport minister Robert Goodwill said:
"For too long drivers have been ripped off by petrol prices on motorways."