Forecourt operators should prepare to fill up their tanks before the October 30 Budget, to ease the pain when the Chancellor will inevitably raise fuel duty, warns industry commentator Jan Mikula.
There’s another Budget coming at the end of October and already every lobby group in the political and economic ecosystem is getting its pleading into the media – and no doubt doing even more behind the scenes to try and influence the new Chancellor before she stands up in the House of Commons to deliver her first Budget speech.
Among the louder voices heard to date is the Petrol Retailers Association, asking Chancellor Reeves to maintain the current freeze on fuel duty for road fuels. While most of us would welcome that outcome, I rather suspect that they’re on to a loser here. For the record, the current rate for petrol and diesel road fuels is 52.95ppl. It has been at that figure since then-Chancellor Sunak cut it from 57.95ppl in March 2022.
The simple reason why we are likely to see an increase is that UK public finances are in a bad state. A very bad state. Far too many calls for government spending increases from the NHS, through to defence, education and a thousand other problem areas, and simply not enough revenue to cover any of them. And the Chancellor has already gone on record to state that there will be no increases in VAT, Income Tax or National Insurance in this Budget. And if the government is prepared to ride-out the storm concerning abolishing the Winter Fuel Allowance, then a fuel duty increase must look like a very soft target in comparison.
If nothing else, the timing must feel very neat as well. The media are currently proclaiming that fuel prices are falling to their lowest level in three years; with unleaded down to below 130ppl and diesel below 140ppl. In fact, there are places where you can already get both for below 130ppl, if you shop around. In itself that fuel price drop is somewhat unexpected – being put down to an apparent fall in worldwide demand for oil. Historically oil demand usually increases as we get into autumn This is traditionally ascribed to a surge in demand for heating oil in the US at this time of year. According to the experts, this year is different – one major reason for the drop in demand being a slowdown of the Chinese economy. And let’s not forget, that as pump prices fall, the government’s VAT take on fuel sales also falls.
Anyway, for a Chancellor desperate to raise revenue, that background must be sweet news, especially since UK inflation has remained relatively stable at 2.2% for the 12 months to the end of August. The temptation to raise the fuel duty rate must be almost irresistible: maybe just put it back to where it was in 2021, at 57.95ppl, or perhaps go for bust and take it to 60ppl or more. Any increase will provide the Treasury with more revenue (including the VAT on top of the duty) and might simply put fuel prices back to a level that we’ve all been used to for the last few years. A short pain that might not really be noticed, or if it is, will be forgotten by next year.
Of course, if it happens, they can dress it up a little. Another chance to show some ‘green’ credentials, and give a bit of a boost to the EV project, which appears to be suffering at the moment – sales of EVs in the UK and across Europe have taken something of a dive this year, and manufacturers in Europe are wailing loudly about ‘unfair competition’ from the Far East. Despite the fact that the uptake of EVs actually reduces the government’s revenues from fuel duty and associated fuel VAT in the long-term; that’s a problem that will have to be addressed in somebody’s future Budget.
So, although as a dinosaur consumer who still drives a diesel, I’d much prefer Ms. Reeves to leave fuel duty alone in her Budget, my gut instinct is that if I were a fuel retailer, I’d be filling up my tanks just before the Budget, and perhaps make a little windfall profit at the start of November to ease the pain.
- Nationwide franchise accounting company EKW Group – ekwgroup.co.uk
