Petrol tax to be cut as drivers are forced to pay £1.40 a litre for the first time

 

Tax on petrol is to be cut in this month’s Budget as drivers are forced to pay £1.40 a litre for the first time.

Chancellor George Osborne used a speech at the Tory spring conference in Cardiff to give a clear commitment to act to help motorists.

Mr Osborne, who gives his second Budget on March 23, left himself with no room for manoeuvre when he said he ‘heard’ the complaints about fuel prices. 

 

Highest ever: A petrol sign displays the price of fuel as 140.9p for a litre of unleaded petrol in Rainham, Kent

‘I won’t take risks with economic stability, or wreck the public finances, he said. ‘But I promise you I am doing everything I can to find a way to help.’

Treasury officials appear increasingly confident that the idea of a fuel duty ‘stabiliser’ - a system which would see duty cut as oil prices rise, and increased as they fall - can be made to work. 

 

 

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In the shorter term, the Chancellor is under growing pressure to cancel a 1p increase in fuel duty announced by Labour and due to come into effect on April 1.

The Treasury has enjoyed an unexpected windfall from lower than forecast levels of jobseeker’s allowance claimants, which could allow it to make the move.

Ministers are acutely aware of the long-standing link between a government’s popularity and petrol prices.

At the weekend, the BP garage in Rainham, Kent, was charging motorists £1.40 a litre for unleaded petrol and £1.44 for diesel.

 

Cuts: George Osborne left himself with no room for manoeuvre when he said he ¿heard¿ the complaints about fuel prices

The International Aid Minister, Alan Duncan, a former oil trader, suggested at the weekend that it was not inconceivable that motorists would end up paying £4 a litre.

‘When I said oil would go through $100, people thought I was bonkers. Now we are not far off $130,’ he said.

Peter Carroll, spokesman for Fair Fuel UK, a campaign group, warned: ‘We are being pushed into a fuel price crisis. My reaction to these prices is one of horror, of what it will do to the economy, what it will do to people and what it will do to business.’

Significantly, the Liberal Democrats have withdrawn their longstanding opposition, on environmental grounds, to moves to help motorists.

Treasury Chief Secretary Danny Alexander has pioneered a 5p fuel duty cut for people in remote island communities, and is confident of getting the necessary EU clearance.

Tim Farron, the Lib Dem party president, said soaring fuel costs were forcing people on low incomes to consider giving up work to avoid travel costs.

‘This is not just an issue for white van man or Jeremy Clarkson fans. It is an issue of social inclusion and social justice,’ he said.

Further unrest across Libya and the Middle East is expected to increase the problem of spiralling oil prices. Knock-on effects could include higher food prices because of extra transport costs and more expensive holiday flights.

Ed Balls, the Shadow Chancellor, told Mr Osborne to ‘get his head out of the sand’.

‘He should be helping hard-pressed families now by immediately reversing the Tory VAT rise on fuel,’ he said.