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Motorists face ‘double whammy’ petrol price hike

Written by: Paloma Kubiak
Motoring groups are urging the chancellor not to increase fuel duty in this week’s Budget as the majority of drivers would be “negatively impacted”.

Fuel duty has been kept at 57.95p a litre since March 2011 but 84% of motorists surveyed by the RAC believe the tax burden is already too high.

The findings suggest 26% would like to see the duty kept at the same rate for the rest of this parliament, while 18% would be happy with a freeze to be extended for another year.

However, 36% of the 1,400 motorists surveyed want George Osborne to go one step further and cut the duty by 1p or more.

This is because 68% of motorists would be negatively impacted by a duty rise, with nearly half fearing the increased costs would lead to them spending less on other items and almost a quarter saying the move would mean they’d probably drive less.

Petrol prices have fallen to around £1 a litre thanks to the plummeting cost of oil. Some 80% of motorists said they’d benefitted from reduced car running costs and nearly half have enjoyed more disposable income.

Motorists could face ‘double whammy’

However, motorists may be about to experience the first significant rise in fuel prices in eight months as the oil price is close to going back above the $40 mark for the first time since 4 December 2015.

Combined with a weaker pound, this is likely to lead to a rise in pump prices of around 3p a litre, the RAC warned.

If this were to be coupled with a duty rise in the Budget, motorists could face a dreaded ‘double whammy’ pump price rise at the beginning of April, netting the Treasury additional revenue of up to £1bn.

RAC fuel spokesman Simon Williams said: “The feeling we are getting from motorists could not be clearer: they do not want to see the chancellor announce a fuel duty rise in his Budget speech this Wednesday. There is widespread consensus that lower fuel prices have left people with more money to spend elsewhere which both government and independent analysis shows is good for the economy.

“The chancellor has an excellent record of freezing duty but by not referring to it in the Autumn Statement, he implied that the 57.95p currently charged on every litre will be subject to inflationary increases in line with RPI from April 2016 onwards. And, even an above inflation increase cannot be ruled out. But what is very clear is that any increase will go down like a lead balloon with motorists.”

Insurance premium tax hike

Meanwhile, the AA is also urging George Osborne not to tinker further with Insurance Premium Tax (IPT).

The IPT rate went up from 6% to 9.5% from 1 November but the AA said “senior Westminster sources have indicated the chancellor may slip another 3% IPT increase under the radar in the Budget”.

The breakdown and insurance firm said this would represent a 108% hike in costs for motorists in less than six months, adding an additional £37 to the average car insurance premium for motorists, and around £80 for young motorists.

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