Cut in fuel tax would `create 180,000 jobs'

New research has shown that a small cut in fuel duty would create jobs and boost the economy, as Robert Powell reports...

In 11 days George Osborne will outline to the nation how he intends to raise, and spend, money to spend on public projects over the next year. And fuel taxation is one of the many subjects that will spark debate.

As it stands, Mr Osborne is set to approve a 3p rise in fuel duty, taking it from 57.95 pence per litre (ppl) to 60.95ppl from August.

However, with petrol and diesel prices now at record highs of 137.79ppl and 144.92ppl respectively, the Chancellor is under pressure to not only reverse this rise, but also to implement a cut in the tax instead.

180,000 new jobs

The FairFuelUK campaign is leading calls for the Government to slash fuel duty. Last week the group staged a FairFuel Day outside parliament in an attempt to lobby MPs and push the issue of rising motoring costs up the political agenda.

The protest included the delivery of a key report to 10 Downing Street.

Conducted by the Centre for Economic and Business Research (CEBR), the report states that even a small cut of 2.5p per litre would boost the economy and create 180,000 jobs within five years.

The data also forecasts that such a duty drop would not eat away at the Treasury balance sheet, as tax takings from an increase in economic activity would make up for the lost fuel duty revenue.

Other factors

Pressure from the public, MPs and FairFuel UK managed to secure a 1ppl cut in fuel duty in the 2011 Budget. However, in the months following the move, many motorists were sceptical as to whether the tax cut really materialised at the pump.

Fuel duty makes up around 60% of the price motorists pay at the pump – the highest level in Europe. However the cost of oil – buoyed by market traders and instability in the Middle East – also plays a big part in keeping fuel prices high.

Peter Carroll of the FairFuel UK campaign, said: “There have always been two strands to our campaign: the first is to get fuel duty down. The second is to get some competitiveness and transparency in the market.

“When oil goes up, prices go up. When oil goes down, prices stay up. When there was a 1p cut from the Government, most people didn’t see it. [The market] needs to be challenged. But we can’t do that as individuals, the Government should do that on our behalf.”

More: How to find the cheapest diesel and petrol prices | RAC vs AA vs Green Flag: The best value breakdown cover