In the UK yesterday (23rd May 2022), MP’s debated on the subject of cutting fuel duty by 40% to combat rising fuel costs.

The debate was brought to the house by Tonia Antoniazzi, Labour MP for Gower in Wales after more than 100,000 people signed a petition calling for the reduction in fuel duty.

Antoniazzi said, “The AA has calculated that the cost of filling a typical 55-litre tank has risen during the year from £70.61 to £92.20 for petrol and from £71.94 to £99.48 for diesel.”

“There has been the most derisory of efforts to help drivers. For me, that’s symptomatic of a government who have no idea about the impact that the cost-of-living crisis is having on people across the country – rising home energy prices, food prices rocketing and the cost of fuel at a record high.”

Jessica Morden, MP for Newport East, supported the argument, highlighting: “Collectively, care workers drive more than four million miles a day to care for the vulnerable in our communities. They fear that they may have to leave the profession because the cost of fuel is making it difficult for them to get to work.”

Other related issues that were discussed included people skipping meals to be able to afford to use their car, and mental health issues arising from social isolation because of not being able to afford to travel to see relatives. Antoniazzi said: “We know that there’s more the government can do.”

Elsewhere in the world, governments have done their bit to tackle the issue. Poland has a total axe on fuel VAT, Ireland has a 15-20% cut in excise duty and France offers a 15-cent-per-litre discount.

Chancellor Rishi Sunak announced a 5p-per-litre cut in fuel duty in March 2022 to last 12 months, although this has not compensated for the recent price increases.

Petrol Retailers Association said: “Forecourts have passed on this cut; consumers haven’t felt it at the pumps because prices have since risen. Forecourts have also had to contend with recent cost-of-living increases, such as increases in electricity costs and in the national minimum wage.”

“When the Chancellor set out a cut of 5p per litre in his spring statement, we didn’t think it would make much of a difference. It hasn’t even scratched the surface. In fact, last week, there were newspaper reports of this cut barely being passed on to the customer at the pumps,” said Antoniazzi.

The record for petrol and diesel costs has been broken on 26 separate days so far this year.

Patricia Gibson, SNP MP for North Ayrshire and Arran said, “The Treasury is raking in 20% of the total cost at the forecourt, with fuel price increases bringing in additional VAT, amounting to billions of pounds, all of which is helping to accelerate inflation. As the cost of fuel has risen, so has the VAT being raked in by the Treasury – vast additional revenue for the Chancellor.”

She concluded, “The dithering and delay must end. Halving VAT on fuel will have an immediate and positive impact.”

Exchequer secretary to the Treasury Helen Whately responded to MPs on behalf of the government: “I represent a rural constituency [Faversham and Mid Kent], and I know that for most people in my constituency, there’s no alternative to going by car for most journeys,” she said. 

“As honourable members have said, whether it’s getting to work, doing the school run, going to the supermarket, the doctor or the dentist or visiting family, there’s usually no alternative. If we add to those journeys all the business journeys – the man in a van, delivery drivers, logistics and so on – we can see that so much of our economy is reliant on road transport.”

She said that the government has “stepped in to help, with support measures that add up to £22 billion” and argued that “as these circumstances aren’t unique or specific to the UK, so they can’t be solved by the UK alone”.

“Prices at the pump are not set by the government and nor are crude oil prices more widely, but the government have taken action to help people with recent unprecedented price increases”, Whately said, referring to the 12th consecutive year of a fuel-duty freeze and the 5p cut in fuel duty in March. 

“Given that VAT is applied on top of fuel duty, the 5p duty cut on petrol and diesel also results in a VAT reduction. It effectively translates to a reduction of 6p per litre overall.”

“That said, a VAT reduction isn’t generally the best way to provide help with fuel costs, particularly because it wouldn’t help many businesses, many of which already claim back VAT paid on fuel for business use.”

“About 40% of fuel is used by businesses. If we had just focused on reducing VAT instead of fuel duty, that would have left businesses more exposed to fuel price increases, in turn impacting the cost of goods for consumers. Making the focus fuel duty rather than VAT means that businesses, as well as consumers, will benefit from that tax cut.” 

“The government take fuel duty costs seriously, and we’ve responded with a substantial duty cut to help motorists across the UK.”

“The government and the CMA [Competition and Markets Authority] continue to monitor the situation extremely closely, and members should be in no doubt that further action will be taken if necessary to ensure effective competition.”

“The 5p cut in fuel duty is part of a £22bn package of support to help people with the cost of living. As the chancellor has made clear, we stand ready to do more.”

But Antoniazzi wasn’t as confident: “When we left the EU, one thing we were promised was that VAT on fuel would be cut, and it hasn’t been. There’s a knock-on effect on costs, as many members have said, and the government needs effective and rapid ways of putting money into our constituents’ pockets.”

“Like the 100,000 petitioners, we want more to be done, because unfortunately they aren’t feeling the benefit of what has been done so far. I thank the minister for responding, and we will carry on from here.”