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Government relents and scraps fuel duty rise

by Dave Keating | July 17, 2008 at 07:14 am | 127 views | add comment

The UK government has cancelled a planned 2p rise in fuel tax in light of the ever increasing petrol prices. However the timing to the decision, coming as it does shortly before the very important by-election in Glasgow East, has being deemed suspicious.

Gordon Brown may be using the fuel tax cancellation as a way of ensuring that the Labour party doesn't lose the by-election on his home turf.

Gordon Brown and Alistair Darling finally scrapped a planned 2p rise in fuel duty yesterday as they bowed to pressure to ease financial stress on badly squeezed families and businesses.

In a long-expected move that cost the Treasury £550 million in lost revenue, the Prime Minister and Chancellor acted to soothe households, hauliers and companies.

The decision followed months of pressure on ministers as the surging price of oil has fed through into soaring prices at the pumps for motorists. The cost of filling a family car has leapt by more than £20 over the past year as petrol prices have climbed to a typical 120p a litre, reaching as high as 132p in some parts of Britain.

Mr Darling announced the planned 2p fuel duty rise in his April Budget but said that he would defer it until October. Yesterday's announcement means that the increase will be put off until April 2009, when a 1.84p rise is being pencilled in. Scrapping that would cost the Chancellor another £1billion a year. The delay is the latest in a series of policy retreats over tax by the Chancellor, including a compensation package to mitigate the scrapping of the 10p income tax band, and U-turns over capital gains tax proposals and so-called non-domiciled residents.