We are writing you today to highlight the role that fuel duty could play as a revenue raising alternative to benefit austerity.
Removing the 'temporary' 5p fuel duty cut would raise approximately £ 2 billion per year, which would offset the proposed changes to benefit regime.
When adjusted for inflation, petrol is the cheapest is has been for 23 years. (ref 1)
Commonly stated reasons by opponents of fuel duty increases :-
1) Impacts the poorest the most.
The poorest in our society don't have access to a car, 32% of the poorest 1/5th of households do not have access to a car (ref 2)
For those 1/3rd of poorest households that rely on public transport, they have seen fare costs run way ahead of inflation and weekly earnings over the last 25 years, whereas the cost of running a car has run behind average weekly earnings.
In cash terms most of the benefit of lower fuel duty goes to wealthier households
(ref 3)
It would be fair to say that for those poorest households, that can afford to run a car, they would proportionally be heavily impacted by higher fuel costs. However as a targeted wealth equality measure, keeping fuel duty low by comparison with universal winter fuel payments, it makes WFP look positively well targeted. Increasing the minimum wage would be a vastly better targeted wealth inequality measure, and ensuring that workers such as mobile care workers are paid for their time travelling between calls.
2) Everything gets moved by road, everything will cost more.
While the final mile may always be by road, there are modal choices that work for ‘trunk’ hauls, and price has a major impact on mode selection.
The port operator DP world has been operating a modal shift incentive scheme (ref 4), they have been successful in increasing the modal share of rail for containers from Solent ports from around 20% to around 30%, but the low cost of fuel has caused this share to drop back to around 25% - which indicates the high sensitivity of choosing rail or road to cost of haulage.
HGVs are disproportionately involved in more serious accidents, and cause the vast majority of pavement wear and hence potholes, to the extent that for pavement lifetime wear calculations highway engineers don’t even both to count cars towards the total wear.
The Road Haulage Association (RHA) publishes reports on the cost of elements of haulage. Fuel and fuel additive made up 30.1% of haulage costs in 2022 (ref 5), but this had dropped to 22.9% in 2024, and with recent oil price reductions would be expected to have fallen even further.
At 140p / litre, a 5p increase in fuel cost would increase cost of haulage by just 0.8%
There is less data about how much of the cost of a grocery basket is made up of distribution costs, but sources indicate it is in the range of 6-20% (ref 6)
Therefore the inflationary effect of a 5p fuel increase on grocery costs would be in the region of 0.05% - 0.16%, which is barely a rounding error when general grocery inflation is running at 3%.
The OBR forecasts assume that the ‘temporary’ 5p duty cut will be reversed, so if this is not done then the fiscal hole will be even worse that currently predicted (ref 7)
Prominent Labour donors such as John Caudwell are now calling for consideration of increasing fuel duty: 'Everyone listening will be horrified, but it would save £20 billion pounds.' (over 5 years)
He has a suggestion on how the government can raise money 'without demolishing individual sectors' - put the price of petrol up by 10p a litre.
https://x.com/LBC/status/1937576462124536097
As Keir Starmer put it at the Welsh Labour conference reforms to the benefit system must be done 'in a Labour way', then surely the tax system should also be operated 'in a Labour way'?
Encouraging the wealthy to drive more and larger vehicles cannot be the ‘Labour way’ ? (which is precisely what keeping fuel duty low does)
So we urge you to consider as a bare minimum reversing the previous government’s ‘temporary’ 5p fuel duty cut as an alternative to yet more benefit austerity, there has never been a better time to end the 14 year drought of fuel duty freezes (and above inflation public transport fare rises).
Yours sincerely
Chris Page
Chair
Railfuture is Britain's leading independent organisation campaigning for a bigger better railway. It is a voluntary group representing rail users, with 20,000 affiliated and individual members.
Railfuture is not affiliated to or funded by train companies, political parties or trade unions, and uses one-member one-vote democracy.
https://www.railfuture.org.uk/Welcome-to-Railfuture
ref 1:
https://x.com/FraserNelson/status/1937041638817194119
https://www.thetimes.com/comment/columnists/article/petrol-is-cheaper-than-you-might-think-so-will-a-duty-rise-follow-fzr5x5335
(as above without paywall) https://archive.is/E8Vrw
ref 2: https://www.health.org.uk/evidence-hub/transport/transport-trends/trends-in-households-without-access-to-a-car
ref 3: https://www.smf.co.uk/commentary_podcasts/upcoming-fuel-duty-freeze-will-cost-government-over-20-billion-and-do-nothing-to-alleviate-poverty/
ref 4: https://www.dpworld.com/southampton/supply-chain/modal-shift-programme
ref 5: https://www.rha.uk.net/Portals/0/Membership/Annual%20Cost%20and%20Pay%20Surveys/RHA-Haulage-Cost-Movement-2024.pdf?ver=Cz4wQ2TxjQSPXPGVlqEBMQ%3D%3D
p20 2023: fuel + fuel additive: 24.71% 2024: 22.94[| https://www.rha.uk.net/Portals/0/Membership/Annual");" title="Click to edit dynamic variable:
https://www.rha.uk.net/Portals/0/Membership/Annual">No value assigned20Cost%20and%20Pay%20Surveys/RHA_Haulage%20cost%20movement%202023_Final.pdf?ver=2023-12-15-110033-893×tamp=1702638087453
p14 2022: 30.11%
ref 6: https://www.logineko.com/knowledge/the-true-cost-of-convenience/
ref 7: https://obr.uk/docs/dlm_uploads/Fuel-duty-supplementary-release_receipts-by-vehicle-type.pdf