The AA has given qualified support to the campaign to secure fuel duty deferment for petrol stations.

However, an expert in duty fuel deferment said other comments from the AA, linking it to cost savings, showed that it did not understand the benefits.

Duty deferment enables forecourts to buy fuels without paying the 60% cost of VAT and duty upfront, before they can recoup it in sales.

The AA said that switching the point that tax is paid to after the driver has bought it would give retailers “cash flow savings”, and it repeated a quote from last month’s Forecourt Trader, where tax expert Alan Powell said it was a ‘game changer’.

It added: “The AA would strongly support such a move for helping remote rural fuel stations. It is a measure that can be targeted at smaller volume sites without the need for EU permission or the loss of tax revenue from the public purse. There may also be a case for helping lower-volume retailers struggling in towns against the more aggressive of the competitive supermarkets.

“However, AA members and other drivers suffering from pumped-up prices in uncompetitive ‘postcode lottery’ towns would expect some relief themselves. It would be hard to support cost savings for urban petrol stations that are already charging 3p, 4p or 5p more a litre than towns just down the road – unless there was a way of ensuring that those savings were guaranteed to stimulate fairer prices.”

Alan Powell said the AA’s comments about cost savings “completely missed the point. Duty deferment is not about savings it is about cash flow.”

In its monthly review of fuel prices the AA said UK drivers were paying the lowest average price for petrol in more than two and a half years, but the steep decline in wholesale prices that started in early September had come to an end.

Compared to a month ago, the average pump price of petrol has fallen from 132.16ppl to 130.44ppl, with prices in south London as low as 124.9ppl. Diesel prices also continued to fall, down from an average of 139.12p a litre in mid October to 137.78p now.

It added that Asda’s plans for 100 standalone petrol stations was likely to introduce more price competition, particularly in the south east.

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