Drivers who fill up at Tesco, Asda, Sainsbury’s, and Morrisons have been given a nine-week warning of a price hike, with fuel duty expected to increase in the government’s upcoming Budget. The warning comes after Prime Minister Sir Keir Starmer highlighted a £22 billion deficit in public finances. The Conservative government had implemented a 5p per litre cut in fuel duty in March 2022, previously frozen at 57.95p since March 2011, with VAT at 20% charged on top of the total price.
RAC’s head of policy, Simon Williams, emphasised that Chancellor Rachel Reeves has no choice but to raise fuel duty back to 58p a litre in the forthcoming Budget. The RAC believes that drivers have not truly benefitted from the current fuel duty discount due to retailers’ higher-than-average margins. The organisation is advocating for the introduction of a pay-per-mile system in place of fuel duty, with VAT being the only tax levied on fuel, removing retailers’ ability to impose inflated prices.
Amidst calls for a fuel duty increase, the RAC is urging retailers to adjust fuel prices to reflect lower wholesale costs. They propose reducing average petrol prices from 142p per litre to 136p per litre, and diesel prices from 147p per litre to 139p per litre. Retailers’ margins on fuel were reportedly 10p per litre, higher than the long-term average of 8p per litre. The Labour government’s first Budget is scheduled to be presented by the Chancellor on Wednesday, October 30.
With the looming possibility of a fuel duty hike, drivers are advised to brace for potential increases in petrol and diesel costs in October. The RAC’s stance on the issue underscores the need for a restructuring of taxation for drivers, as electric vehicles become more prevalent on the roads. The organisation’s call for fair fuel pricing aligns with the changing landscape of transportation and the need for more equitable cost distribution for motorists.