Government inflation targets scuppered by fuel duty rises, says FTA

Tuesday 16 February 2010

The Government has dealt itself a poor hand having revealed that one of the largest culprits for the sharp rise in annual inflation last year was fuel costs – a factor exacerbated by successive, above-inflation fuel duty rises, according to the Freight Transport Association.

Jo Tanner of the FTA said:

“Inflation has risen largely off the back of the rising fuel costs of transporting goods and services. Fuel accounts for over 30 per cent of overall transport costs, and these costs trickle down to the services and businesses that rely on the logistics sector simply to run.

“It is anathema, then, to increase the tax imposed on the cost of a tank of diesel during a recession, especially when the actual price of a barrel of oil has doubled – yet this is precisely what the Government has done and is committed to doing in the future.”

The largest influence on the upward trend found in the Consumer Price Index annual rate came from transport, where the price of fuels and lubricants rose by 2.2 per cent – a record rate of growth for a December to January period.

Tanner concluded:

“The cost of oil has doubled in the last year, placing an increasing burden on FTA members, yet the Government continues to add to this through more and more hikes in fuel duty. This obsession with raising fuel duty has blown up in the Treasury’s face, pushing their coveted inflation targets beyond reach.

“Rises in inflation are the last thing the Government will want this close to a General Election, yet the power to bring it down – and help businesses – is in its hands. By reducing fuel duty levels for commercial vehicles, it could help to keep prices of household goods down, and keep UK businesses moving. The challenge is there, Mr Darling.”

Notes for editors

Last year, the logistics sector was dealt a 3.84 pence per litre rise in fuel duty on diesel (1.84ppl in April 2009 and 2ppl in September 2009), on top of a 2ppl rise in December 2008.

The price of oil per barrel has doubled since December 2008 when it hit a low of $36 a barrel.
 

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