PRA chairman Brian Madderson has written to the chancellor saying there is now an “overwhelming case” for a 3ppl cut in duty in his Autumn Statement on November 23.
Madderson said the cut was needed because consumers were paying £5bn more for fuel than a year ago.
He said there had been a “perfect storm” hitting pump prices over recent weeks with news of a potential cut in oil production being discussed between OPEC and Russia plus the weakening of sterling versus the US dollar.
Global oil prices, as represented by Brent Crude, had moved up by 15% but by far the biggest influence has been the near 25% fall in the UK’s exchange rate against the US currency.
From an average pump price of 104ppl at the start of the year, the market is facing an average of 120ppl by Christmas – some 16ppl extra. With 35bn litres of road fuel purchased annually, this extra cost could be taking over £5bn out of consumer’s pockets that would have been spent elsewhere. Inevitably, this will start to put the brakes on overall spending as well as pushing up inflation which is now expected to rise to 3% or even 4% in 2017.
Madderson argued that the Chancellor should use the windfall double tax gains (fixed duty at 57.95ppl plus 20% vat) made this year from year-on-year increased fuel volumes to underwrite a significant fuel duty cut.
He said: “This is a perfect opportunity to show that the Government really does mean to keep the economy moving along when so many uncertainties lie ahead.”