Chancellor George Osborne has given the forecourt industry and UK motorists a glimmer of hope by saying he is considering cancelling the fuel duty increase due to take effect in April.
Following mounting pressure to rethink the 1ppl duty hike, which after the addition of VAT and inflation would add at least 4ppl to the pump price, the Chancellor told BBC West Midlands that the government could do "something about it" in the Budget on March 23, saying: "We can override it. We are looking at that."
RMI Petrol chairman Brian Madderson, who has lobbied hard to have the fuel duty escalator halted, said a cancellation of April’s rise would be "a fantastic result". He said: "The Chancellor is definitely talking about freezing the duty escalator on April 1 as a result of intense lobbying by RMI Petrol and petitions by the tabloid newspapers.
"The duty escalator will kill any recovery and growth we would have hoped for. We hope to work with the government if they are looking at any sensible alternatives."
Many retailers have had one of the toughest Januarys to date as motorists change their driving habits to ease the financial burden of soaring fuel prices. And while a move to do something about fuel duty would be welcome, many are not convinced that the Chancellor will go through with a cancellation of April’s rise.
Ken Popat, who runs Barking Service Station on the A13 in Barking, Essex, said: "I don’t believe the government will cut the duty increase. Promises or not I don’t believe any Chancellor. They could restrict it in the future but I don’t think they will reverse what’s already done.
"Diesel is my biggest problem because 60% of my customers buy diesel and I’m noticing more and more people cutting their car use and car sharing. It’s not fair on the working people because productivity goes down if you’re not mobile."
Julian Holliss, who runs Holliss Service Stations in Dartmouth, Devon, said: "There’s growing pressure coming from a number of angles for the duty escalator to be scrapped but whether it will happen or not remains to be seen. I’m filled with optimism but seeing will be believing. At least it seems to be on the Chancellor’s radar, which it wasn’t three weeks or a month ago keep up the good work, Brian.
"It is a difficult time for us prices are high and margins are rubbish but you’ve just got to take a deep breath and grin and bear it, and look for the positives."
Susie Hawkins, director of Top 50 Indie the Simon Smith Group, said: "You can never be confident but I would be hopeful because it’s definitely needed. The money the government is getting out of one commodity is crazy and it can’t be sustained but you can never tell.
"The Chancellor’s comments are quite a good indicator that the government is possibly going down that route. The fair fuel stabiliser is so complicated it could never be worked out. I don’t think the government is up to calculating it and doing it. The easier way would be not to implement the duty increase and let’s hope they do."
Fair fuel stabiliser
Talk of scrapping the next duty rise comes after Prime Minister David Cameron said he was revisiting the concept of a ’fair fuel stabiliser’. According to RMI Petrol, while the idea has popular appeal, the mechanism would require detailed investigation, involvement of industry and be both complex and costly to manage.
Madderson has now written four letters to the government calling for something to be done to ease the burden of rising fuel prices as the increasing cost of crude shows no sign of letting up. In his latest letter to the Chancellor on January 26, he included RMI Petrol’s appraisal of the fair fuel stabiliser concept, which is hoped to be the beginnings of a constructive dialogue with the government’s tax and energy specialists.
Madderon’s 11-point appraisal highlights that global crude oil prices do not necessarily move in line with prices paid by the industry and exchange rates play an equal part in affecting supply prices.
"With the link between crude oil price movement and retail pricing at best tenuous, a fair fuel stabiliser scheme could be ruinous for anyone who operates in the supply chain on a ’stock duty paid’ basis that is wholesalers or resellers such as independent petrol station dealers," explained Madderson.
"For example, if £2m value of stock is purchased and the fair fuel stabliser regulator decides is worth only £1.9m because of an unexpected reduction in duty rate as crude oil prices rise, would the government really want to set up a costly compensation scheme and how would that be monitored?
"Without an immediate compensation scheme the wholesaler or reseller would be forced to maintain prices at previous levels until they had sold out their stock purchased at a higher level, leading to a big discontinuity of prices, and certainly penalising the small- to medium-sized enterprise versus the large multinational groups such as grocery multiples who turn over their stock at a much faster rate."
In addition, RMI Petrol raised concern about how a high price will be determined and at what point duty would hit zero, questioning the feasibility of the fair fuel stabliser if the government continually has to shift pre-set ratios.
Madderson also asked if HMRC is fully integrated and with the IT skills and capacity to manage such a complex mechanism, highlighting the increased red tape that would be caused, which is counter to the government’s manifesto aims.
support for the cause
The Sun newspaper has rallied support with its Keep it Down campaign comprising an online petition to urge Osbourne to ’Do His Duty’ and call a halt to April’s duty rise scoring more than 100,000 signatures in the process. Number-one Indie MRH lent its support with two of the newspaper’s page three girls collecting nearly 200 signatures in just a few hours at the group’s Jet-branded site in Streatham (pictured right). The Jet site was also the location for a BBC film explaining to motorists where their petrol money goes, using fuel price breakdown data provided by RMI Petrol. Readers can view the video at www.bbc.co.uk/news/business-12250225 and sign the Sun petition at www.thesun.co.uk