The Petrol Retailers’ Association has welcomed the confirmation in today’s Budget of the measure outlined in the Autumn Statement, to cancel the 2ppl fuel duty increase in September 2014. Today’s announcement marks the longest period of duty freeze (4 years, 4 months), in more than 40 years.
Taking into account the projection of RPI in the first quarter of 2014, combined with the current 20% VAT rate, PRA said this action will save the motorist up to 3ppl.
PRA chairman Brian Madderson commented: “The PRA has been lobbying Government and the Treasury on the subject of fuel duty, so it is good news to hear the Chancellor’s commitment.
“However, the level of overall fuel tax in the UK remains among the highest in the EU. Despite the 10ppl fall in average pump prices since March 2013, fuel tax still accounts for around 60% of the purchase.
“The UK is one of the few EU countries to tax diesel at the same level as petrol with negative impact on the business community and the increasing number of motorists with diesel engine cars.
“A significant unintended consequence of this policy introduced by the last Government is to encourage foreign hauliers to fit long range tanks and fill up in Luxembourg where tax is less than 40% of the purchase cost.
“The PRA has estimated that the Treasury is losing up to £1.5bn revenue each year. Perhaps more importantly, this huge tax differential also provides continental hauliers with a competitive advantage over domestic companies, which miss out on their traditional UK contracts and are forced to reduce jobs as a result.
“If Government really wants to help the UK economy grow and prosper, an overhaul of fuel taxation is urgently needed”.
These sentiments were echoed by the Freight Transport Association which welcomed the freeze in fuel duty, but expressed disappointment that the Chancellor had not taken the opportunity to boost the economy by reducing fuel duty by 3ppl as the FTA requested in its pre-Budget submission.
James Hookham, FTA managing director of policy and communications, said: “The Chancellor has kept his promise to freeze fuel duty and industry will be £187m a year better off for that, but he missed the opportunity to stimulate the economy further by reducing fuel duty and putting around £690m into the pockets of families and British business. This could have given a further stimulus to the economy and locked in the positive growth already achieved.”
As part of its pre-Budget submission, FTA asked the Chancellor to consider the economic benefits that could be delivered by further development of the government’s approach to fuel duty. The association said that reducing road fuel duty would ease cost pressure on businesses operating commercial vehicles and stimulate economic growth.
According to FTA figures it is estimated that every penny of fuel duty costs commercial vehicle operators £116m a year, and a 3ppl cut would have saved around £350m a year for an industry that all British businesses rely on.
Commenting on taxation measures announced, Ben Jones, tax expert at global law firm Eversheds, said: “The increase and extension of the annual investment allowance was the Chancellor’s headline business tax announcement, with the 100% increase being a particular surprise. This incentive has the widest application of the Budget’s business tax changes and will deliver real tax savings and investment incentive to UK business.”
Association of Convenience Stores (ACS) chief executive James Lowman said: “This budget builds on strong existing announcements on reducing national insurance contributions and business rate bills for local shops that will come into force on the 6th April.
“The proposed increase in the threshold for the annual investment allowance is a further incentive to business to invest. We know that over a quarter of independent shop owners currently have plans to invest in their shop and this measure will help them to do so.”
While the drinks industry welcomed new concessions from the Chancellor, with beer duty cut by 1p per pint and duty on cider and spirits frozen, the tobacco industry criticised him for maintaining the duty escalator on their products.
James Lowman said: “We welcome the scrapping of the alcohol duty escalator and the decision to reduce beer duty by 1p, which will benefit consumers and reduce some of the pressure on local shops losing trade to the illegal market. However, there remains a significant illegal market in alcohol products, and we will continue to press for more focus on catching illegal sellers and tougher penalties once they are caught.”
David Forde, UK managing director of Heineken, commented: “I will be raising a cold pint to the Chancellor tonight. His announcement on cider and beer duty will be cheered at breweries, pubs, bars and living rooms across the UK. By freezing cider duty and again reducing beer duty – he sends a clear message that brewing, cider making and the great British pub are important to the UK’s economy."
Andrew Cowan, country director, Diageo Great Britain, said: “The Chancellor has today given a huge boost to one of Britain’s most successful industries. From Scotch whisky to London Gin, British spirits are admired and enjoyed around the world. In freeing the industry from a debilitating tax policy the Government has given a show of support for these quality products. That will benefit the industry not just at home but also help us as we fly the flag for British business across the world.”
However, Paul Stockall of the Tobacco Manufacturers’ Association (TMA), commented: “Today’s announcement to increase tobacco duties by 2% above inflation and continue this duty escalator policy through the next parliament will do nothing to arrest the increase in illegal tobacco that is currently costing the UK Government up to £7.9m per day in lost tax revenues.
“This loss in revenue is further compounded by the Office for Budget Responsibility’s repeated downgrading of legitimate tobacco receipts, which has seen projected revenues for 2013/14 fall by up to £200m, as consumers faced with higher tax-led prices and weak disposable income increasingly switch to the illegal market. The Government has missed an important opportunity to address this counterproductive tax policy.”