The RAC has criticised the 5p fuel duty cut, arguing it fails to benefit drivers.
- Introduced to mitigate the cost of living crisis, the duty cut costs the Treasury £2 billion annually.
- Fuel retailers are accused of absorbing the savings, resulting in unprecedented profit margins.
- The RAC states that motorists pay significantly more due to high retail margins, despite reduced wholesale prices.
- Controversy persists as the government faces pressure to reassess the fuel duty measure.
In 2022, in a bid to ease the cost of living crisis, the UK government implemented a 5p reduction in fuel duty. However, according to recent statements from the RAC, this measure has not led to the anticipated drop in fuel prices for consumers. Instead, it is costing the Treasury approximately £2 billion each year. The RAC argues that the expected savings are not reaching consumers at the pumps.
The motoring group has accused fuel retailers of capturing the benefits intended for drivers, with profit margins for petrol and diesel reaching record highs. Specifically, margins now stand at 13p per litre for unleaded fuel and 15p for diesel, starkly up from pre-pandemic levels of 8p. Simon Williams, Head of Policy at the RAC, criticised major retailers for maintaining high prices. He stated: “The biggest retailers’ refusal not to reduce their prices to fairer levels is continuing to cost drivers dear.”
Initially, the reduction by then-Chancellor Rishi Sunak was anticipated to help motorists save 6p per litre, considering the VAT inclusion. However, rising oil prices soon offset these savings. Despite a subsequent drop in wholesale costs, high retail margins persist, indicating that the benefits of the duty reduction are not being passed on to drivers. Fuel duty remains a fixed element of fuel cost at 52.95p per litre, down from its previous 57.95p. The RAC has called for the duty to revert to its former rate in the forthcoming budget, arguing that the cut is unjustifiably enriching retailers while burdening public funds.
The Competition and Markets Authority has reported that motorists were overcharged £1.6 billion last year due to inflated profit margins. Williams remarked, “We’d normally be against any increase in duty, but we’ve long been saying drivers haven’t been benefitting from the current discount due to much higher-than-average retailer margins.”
In a related insight, the AA highlighted that although fuel prices have moderated through the summer, motorway service station rates remain exorbitantly high. Their spokesperson, Luke Bosdet, criticised these service areas for their non-competitive pricing structure, stating: “Pump prices at motorway service areas continue the tradition of being almost completely uncompetitive.” The government has introduced a pump price transparency scheme, transitioning from a voluntary to statutory basis, aimed at enhancing pricing transparency and offering competitive options for motorists, although its impact remains to be seen.
The ongoing debate over the effectiveness of the fuel duty cut underscores the need for government intervention to ensure that savings reach the intended beneficiaries—drivers.
