Smash and grab fuel duty hike puts businesses on borrowed time, warns FTA

Wednesday 29 September 2010

The second of three planned fuel duty rises during 2010/11 will come into effect on 1 October, adding another £125 million per year to industry’s transport bill.  The Freight Transport Association warns that this smash and grab approach to taxation could put many struggling companies on the ropes.

Simon Chapman, FTA’s Chief Economist, said:

“Diesel is an unavoidable expense and accounts for a third of the costs of running a truck. Successive, above inflation tax hikes since 2009 mean the freight industry is shouldering a disproportionate burden in narrowing the public sector deficit. With another rise due in January and above inflation rises set for the next three years, many businesses hit hard by the recent recession will feel like they are on borrowed time.”

The cost of diesel at the pumps is accelerating away from the rate of inflation and Friday’s diesel duty rise of 1 pence per litre to 58.19ppl, will see this gap widen further.

Chapman concluded:

“The price of oil is the highest it’s been for three months and is set to rise further as we come into the autumn peak period of oil demand. With economic recovery still so fragile, now is not the time to compound the problem with artificial price hikes.

“With the duty hike affecting petrol too, the Treasury will net an extra £500 million a year in total from all road users. For every £1 of tax raised from road users, just 22 pence is currently spent on the road network. If the Government persists with the strategy of above inflation rises in fuel duty, it should ‘ring fence’ the element that exceeds inflation and invest it in those road and rail networks in most urgent need of improvement.”

Notes for editors

There was relief earlier in the year when the then Labour government replaced its plans to impose an inflation-busting 3 pence per litre fuel duty hike in April, and chose, instead, to adopt a staggered approach.

The price of diesel at the pump has seen an annual rise of 8.6 per cent, to 101.11 ppl, whereas inflation in the 12 months to August 2010 was 3.1 per cent (Consumer Prices Index).

To speak with Simon Chapman, FTA’s Chief Economist, please call 01892 552274 or email schapman@fta.co.uk
 

FTA Press Office

01892 552255
press.office@fta.co.uk