The fact that the government has finally bowed to public pressure and scrapped increases in fuel duty planned for October has been widely welcomed by the industry -and only a few cynics have pointed out that it chose the run-up to a sensitive by-election to make the announcement.
Chancellor Alistair Darling acknowledged that the global credit crunch and sharp rises in world oil prices have pushed up prices at the pump. “Postponing the planned increase in fuel duty is also consistent with the government’s commitment to support the Bank of England in maintaining low inflation. Future rate decisions are a matter for the budget,”?he said.
But it should be remembered that this is no cure – it simply means that the government is not making a bad situation worse.
Geoff Dossetter, the Freight Transport Association’s director of external affairs, points out that:?“The scrapping of the increase at a time of high world oil prices was inevitable. However, at 50 pence a litre, UK diesel duty for commercial vehicles is twice the EU average of just 25 pence a litre.”
But, of course, it is not just diesel which is going up. All fuel prices are increasing. As I write, British Airways is increasing its surcharge to 87 pence a kilo for freight. And, with more and more goods being imported from the Far East rather than being made here, the impact of fuel price rises is higher than it has ever been in the past.
The government can’t do much about the price of aviation fuel – or shipping bunkers for that matter. But that just makes it more important for it to re-evaluate its whole approach to the fuel it does tax.
Its high tax policy makes the price of fuel unreasonable in absolute terms. And, as the House of Commons Transport Committee recently acknowledged, it makes UK companies less competitive than their continental rivals.
Fuel duty needs to come down closer to continental levels simply to enable fair competition in the market. It’s nice of the chancellor to refrain from doing even more damage, but it really is about time he tried to do some good.