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Spring Statement 2022: Fuel duty cut to save drivers £100

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23/03/2022
The government has confirmed it will cut fuel duty by 5p a litre to ease the pain for drivers facing soaring pump prices.

Fuel duty is currently levied at a flat rate of 57.95p per litre for both petrol and diesel but this will fall to 52.95p per litre, the chancellor confirmed.

It has been frozen for 12 consecutive years but now the chancellor, Rishi Sunak, has gone one step further and cut it by 5p a litre from 6pm tonight for drivers across the UK.

Calculations by the RAC show that a 5p cut in fuel duty would shave around £3 off the cost of filling a 55-litre family car.

It comes as unleaded stands at an average 167p per litre while diesel stands at 179p per litre, according to The RAC fuel watch.

As part of the Spring Statement 2022, Sunak, said: “Today I can announce for only the second time in 20 years, fuel duty will be cut. Not by one, not even by two, but by five pence per litre.

“The biggest cut to all fuel duty rates – ever. And while some have called for the cut to last until August, I have decided it will be in place until March next year – a full 12 months.

“Together with the freeze, it’s a tax cut this year for hard-working families and businesses worth over £5 billion. And it will take effect from 6pm tonight.”

It will save the average UK car driver around £100, van driver around £200 and haulier around £1,500, based on average fuel consumption, the government said.

Following the announcement by the chancellor, supermarket Asda confirmed it will cut petrol and diesel prices by 6p a litre this evening (including a 1p reduction in VAT). This will take unleaded to below 160ppl and diesel to 170ppl.

This was followed by Sainsbury’s as it also confirmed a 6p per litre cut (including a 1p VAT cut) on fuel across its 315 forecourts from tonight. Customers will be able to collect Nectar points on transactions – one point per litre purchased.

‘Takes prices back to those seen last week’

Edmund King, AA president, said: “The AA welcomes the cut in fuel duty. However, we are concerned that the benefit will be lost unless retailers pass it on and reflect a fair price at the pumps. Average pump prices yesterday hit new records- despite the fall in wholesale costs.”

RAC head of policy Nicholas Lyes said: “With petrol and diesel prices breaking records almost daily, and the cost to fill up a petrol car at over £92 and a diesel at nearly £100, we’re pleased to see the chancellor has given drivers some much-needed relief at the pumps, but the reality is that a 5p cut in duty is something of a drop in the ocean.

“In reality, reducing it by 5p will only take prices back to where they were just over a week ago. With the cut taking effect at 6pm tonight drivers will only notice the difference at the pumps once retailers have bought new fuel in at the lower rate. There’s also a very real risk retailers could just absorb some or all of the duty cut themselves by not lowering their prices. If this proves to be the case it will be dire for drivers. It also wouldn’t be totally unexpected based on the biggest retailers not reducing their prices late last year when the oil price fell sharply.”

He added that temporarily reducing VAT “would have been a more progressive way of helping drivers” as the tax is applied at the point the fuel is sold, removing any possibility of retailers taking some of the tax cut themselves to increase their profits.

”It’s also the case that the treasury is benefitting hugely from the high fuel prices because of greater VAT revenue. The chancellor is currently getting 28p a litre VAT on petrol and 30p on diesel – this of course comes on top of fuel duty as VAT is a tax on a tax,” he said.

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