Rishi Sunak risks damaging the economy raising fuel duty by 23% – as research reveals inflation will GROW if he does
MOST governments rarely do any evaluation of the long-term outcome to their decisions over money.
Nowhere is this more obvious than when it comes to fuel prices.
Last month the Office for Budget Responsibility dropped a bombshell on 37million motorists — there will be a 23 per cent hike in fuel duty (equivalent to around 12p plus VAT) in the March 2023 Budget.
And despite an ongoing outcry from already hard-pressed motorists, the Government appears to be sticking to it.
On Tuesday at this week’s Parliamentary Liaison Committee, Prime Minister Rishi Sunak refused to deny fuel duty will rise, a position that will mystify millions of voters and lose him even more Tory grass-roots support.
The cost of this is eye-watering — the annual cost for a typical van driver would be £1,000 extra. For an HGV driver, it is a whopping £7,000.
I commissioned a group of highly qualified economists to assess the impact of the levy rise on the highest taxed drivers in the world — us.
And their conclusions are damning.
The absurdity of even raising fuel duty is clear to the majority of us.
But not to those green Lycra-clad government special advisers, who see increased taxation and vehicle bans as the only way to save the planet.
The widely respected gurus at the Centre for Economics and Business Research have worked out that any rise in fuel duty would generate much less net revenue than the OBR expects.
In fact, a 23 per cent tax rise would create unimaginable economic damage, eventually cutting our GDP by about one per cent and reducing employment by about 31,000 jobs.
And that would be just the start of the Government’s journey to an economic apocalypse of its own making.
Why would the Chancellor, Jeremy Hunt, sanction a tax rise that would shrink the economy and add more people to the dole queue?
Worse still, Sunak’s mantra when he was campaigning to become prime minister to fight inflation, would be smashed to smithereens.
Inflation would actually climb by a staggering 2.3 per cent, by the CEBR’s calculations.
A rise in fuel duty would hit the poorest drivers hardest, too. As a proportion of their income, motorists in the poorest ten per cent of the population spend more than twice as much on fuel as the rich.
The amount of road fuel bought in London is falling as car usage drops.
Londoners spend two thirds less on petrol and diesel compared with the rest of us.
As a result, a rise in fuel duty is very much a tax imposed by London on the regions.
Essential vehicle users, especially white van drivers and truckers, have already been hit badly in the Government’s break-neck pursuit to Net Zero.
The effects of a rise in fuel duty will batter critical sectors that already feel they have faced an excessive increase in the burdens on them as a result of ill- informed decision making.
With the growth in online business, vans and all forms of logistics are critical to the economy and the fight to lessen the cost-of-living crisis.
They are the ultimate lifeblood to our nation’s prosperity.
The increase in the burdens on van drivers has already started to affect their willingness to service new and existing clients.
If this continues, a critical link in the service chain and our commercial arteries will break.
The HGV sector is already in a fragile situation, too.
The average age of a lorry driver is 53, and 13 per cent are aged over 60.
Just two in every 100 HGV drivers are below the age of 25.
Their profit margins are estimated at one per cent at best.
Crash inflation
The number of owner-operators has also been falling.
It is conceivable a rise in duty could be the straw that breaks the camel’s back.
And there is more bad news.
The Competition and Markets Authority concluded that the 5p cut in duty announced in the March 2022 Budget had not been fully passed on.
As The Sun reports today, garages are profiteering just as we head off to see our loved ones for the hols. Merry Xmas!
And despite the recent freeze and the ineffective 5p cut, UK diesel taxes are still the highest in any major European economy while petrol prices are close to being the most expensive.
Thanks to FairFuelUK’s campaigning in partnership with The Sun, the policy of freezing fuel duty, in place since 2011, has been highly successful, reducing the CPI by 6.7 per cent and boosting household expenditure by £24billion.
If that had not happened, the recession would be even deeper and inflation even higher.
So Chancellor, keeping fuel duty down has proved successful — it would be bizarre to change it.
I will make it simple for your Treasury “experts”: Cutting fuel duty will boost the economy, crash inflation and restore public confidence and may even help avoid the Government heading to the opposition benches.