PRA welcomes "sensible choice" on fuel tax delay

The chancellor has made a “sensible choice” by postponing the 2p increase in fuel tax, according to the Petrol Retailers’ Association (PRA). PRA director Ray Holloway welcomed Alistair Darling’s announcement that the increase would not be introduced next month,

but warned the move was only really pushing the problem back until October 1.

“The chancellor has made a sensible choice by postponing the fuel duty increase scheduled for 1 April to the autumn,” said Holloway. “The high oil price made it inevitable, but this does not make the rescheduled rise in October any more justifiable. By implication, motorists will have to endure tax increases of around 4.7 pence per litre, covering the excise duty plus VAT in just six months, as announced measures in two budgets are applied.”

Holloway said that a revision of all taxes associated with road transport seemed to have been promised in the budget, which was also welcomed. But he warned of trouble ahead.

“Motorists will also have noticed a return to real increases in fuel tax from 2010,” he explained. “When last used, this measure led to 2000’s fuel protests. Let’s hope our new chancellor reconsiders this policy in his overall review of road taxes.”

Meanwhile, the chancellor announced major reforms to vehicle excise duty, aimed at forcing higher-polluting car owners to pay more.

The Retail Motor Industry Federation (RMI) National Franchised Dealers Association (NFDA) said the government was handling the situation incorrectly, and should concentrate less on punishing the motorist and more on helping manufacturers to produce cleaner cars.

NFDA director Sue Robinson said: “The Chancellor is attempting to encourage the motorist to move to lower emitting cars with the increase in Vehicle Excise Duty (VED) for large vehicles, He asserts that the reclassification of vehicles into six new VED bands will force motorists to choose lower emitting vehicles, but the inducements are so small that the effects are likely to be equally small.

“There are more effective ways to influence the buying habits of motorists than the ‘blunt instrument’ approach of a road tax increase.

“Instead of punishing motorists for choosing what is available, the government needs to do more to assist vehicle manufacturers to develop cleaner vehicles. Consumers need to be given a proper choice, and manufacturers and vehicle dealers need to be able to give it to them.”

The budget included the following key points:

– 2p increase in fuel duty postponed until October.

– Funding set aside for road-pricing proposals.

– For environmental reasons, fuel duty will rise by 0.5p per litre in real terms in 2010.

– From 2009 there will be a major reform of the vehicle excise duty. For new cars from 2010, the lowest-polluting cars will pay no road tax in the first year. Higher-polluting cars will pay more, including a £950 “showroom” tax that will come into effect from April 2010.

– The duty differential for renewable fuels will stop in 2010-11. From then on, the Renewable Transport Fuel Obligation (RTFO) will provide the total support for biofuels.

– The duty differential in favour of liquefied petroleum gas (LPG) will be reduced by 1p a litre in each of the next three years, while that in favour of compressed natural gas (CNG) will be maintained until 2010-11.

The Federation of Petroleum Suppliers was also pleased with the decision to postpone the introduction of the extra 2p fuel duty, but it agreed with the PRA that the move would not solve the problems created for independent forecourts by duty rises – it would merely put them off until October.

The federation revealed it was preparing a paper to give to Treasury officials which would call for more support for independent retail sites.

The paper – which follows a pre-budget meeting of the oils trade associations with Angela Eagle, the exchequer secretary to the Treasury – will plead the case of the UK’s independent retail sites. This includes a recommendation that the grant scheme which is available to rural sites in Scotland should be extended to cover the rest of the UK.

Not everyone was pleased with the fuel tax postponement though. The Campaign for Better Transport described the delay as a “disaster and a broken promise that shows little regard for climate change or for alternatives to the car”.

The group’s executive director, Stephen Joseph, added: “A truly green budget would have taken the extra duty and invested it in better transport, especially local public transport.”

Meanwhile, the ACS blasted Mr Darling for putting up duty on tobacco and alcohol, which includes 11p on a pack of 20 cigarettes, 4p on a pint of beer, 14p on a bottle of wine and 55p on a bottle of spirits.

ACS chief executive James Lowman said the increases meant the chancellor was “widening the differential between the prices in legitimate shops and those charged by illegal bootleggers who pay no tax and have no regard for the laws on responsible selling”.

He also said the ACS supported Mr Darling’s stance on cutting carrier bag usage. He said that the proposed levy on carrier bags, to be introduced if further progress is not made towards reducing the environmental impact of plastic bags, would hold no fears for convenience stores “if introduced sensitively”. He added that the ACS would be happy to work with the government on working out the detail of such a levy.