The RAC calls for the cessation of the 5p fuel duty cut, originally introduced in 2022 to lessen the cost of living crisis.
- Introduced to help motorists save on fuel costs, the duty cut is costing the government £2 billion annually.
- Despite the cut, savings have not materialised for drivers due to high retail margins.
- High profit margins among retailers have led to minimal consumer benefits, with record margins of 13p on unleaded fuel.
- Calls have been made for the re-evaluation of the duty cut, amidst concerns that drivers are overpaying.
The 5p fuel duty cut, introduced in 2022 to mitigate the cost of living crisis, is under scrutiny by the RAC. Initially implemented by then-Chancellor Rishi Sunak, the measure was aimed at reducing motorists’ expenses amidst rising fuel prices post-Russia’s invasion of Ukraine. However, it’s reported that the expected relief has not reached consumers, as retailers have maintained high profit margins.
The cost to the Treasury from this duty cut stands at £2 billion annually. Despite these costs, drivers have not experienced the anticipated 6p per litre savings, as the wholesale price increases have offset potential benefits. Retailers have reportedly increased their profit margins significantly, with unleaded fuel and diesel seeing margins of 13p and 15p per litre respectively.
Simon Williams, RAC’s head of policy, has criticised major retailers, highlighting their unwillingness to adjust prices to fairer levels. He stated, ‘The biggest retailers’ refusal not to reduce their prices to fairer levels is continuing to cost drivers dear.’ The retailers’ reluctance comes amidst expectations that all would benefit from the temporary duty cut, emphasising the unjust nature of the current situation.
Analyses from the Competition and Markets Authority (CMA) revealed that motorists were overcharged by £1.6 billion last year due to inflated retail margins. This has prompted calls for the duty cut to be reversed. Simon Williams argues that bringing the duty back to its previous rate of 58p per litre during the upcoming budget could recover government losses and correct the market imbalance.
The RAC has urged retailers to adjust their pump prices to better reflect lower wholesale costs. They propose reducing average petrol prices from 142p to 136p per litre, and diesel from 147p to 139p per litre. However, these appeals are contested by the Petrol Retailers’ Association, whose executive director Gordon Balmer attributes rising retail costs to increased interest rates, energy prices, crime, and labour costs.
The transparency in pump pricing is under examination by the CMA’s upcoming statutory scheme, which promises to offer clarity on fuel pricing practices. Despite fuel prices decreasing over the summer, motorway service station prices remain high, as highlighted by the AA. Luke Bosdet, AA’s spokesperson, condemned the high costs at these stations, labelling them as uncompetitive and exorbitant.
As the debate on fuel duty continues, the RAC’s stance pressures the government to reconsider its effectiveness.
