Exposed: George Osborne Lavishes £30bn On Motorists But Makes 'Little Difference' To Petrol Prices

The Chancellor of the Exchequer George Osborne
The Chancellor of the Exchequer George Osborne
Stuart C. Wilson via Getty Images

George Osborne’s fuel duty giveaway will have cost taxpayers almost £30 billion by next year, the Huffington Post UK can reveal as the Chancellor looks to make deeper spending cuts.

However, critics say his headline-grabbing announcements have done little to ease the burden on motorists still being clobbered by the Treasury as three-quarters of the price paid on the forecourts is tax.

And they add the Tory Chancellor's generosity is not really a cut in duty as his moves have amounted to keeping prices 17 pence per litre lower than they would have been under Labour's plans.

Moreover, they been eclipsed by the 24 pence per litre drop in prices at the pumps since 2011 thanks to falling oil prices - making a bigger saving for household budgets.

This morning, the Chancellor told the BBC's Andrew Marr Show he would find "additional savings" in his Budget this week.

He said fuel duty increases were already "pencilled in" for future years - there is an automatic inflationary rise - but pointed to the Tory manifesto which promised to "protect" motorists.

A Huffington Post analysis of official figures shows that the Tory Chancellor will have lost £22.6 billion in revenue by the end of 2015-16 - and £28.9 billion in 2016-17 - through a series of crowd-pleasing freezes and cuts announced since his first in 2011.

The figure is significant since Osborne needs to plug an £18 billion “black hole” in the economy.

The policies have been rewarded with a rash of positive front page headlines on the morning after his Budgets and Autumn Statements, infamously this one from The Sun last year.

The Sun hails £10 a tank saved over five years

Yet motoring groups suggest the announcements have owed more to politics than making a meaningful difference to families, small businesses and other would-be voters.

And they are alarmed by some backbench Tory MPs who have called on the Chancellor to use the oil price slump to recoup some of his fuel duty loses.

This week, Osborne unveils his annual Budget where his decision on fuel duty, and in turn the impact on prices at the pumps, will be one of the most eagerly-anticipated.

Since he became Chancellor six years ago, playing with fuel duty has been one of the most effective political weapons in his arsenal.

In 2011, he scrapped “Labour’s fuel duty escalator” which halted petrol taxes rising by 1p a litre above inflation, and replaced it with a “stabiliser” that held rises to inflation. He knocked a penny off a litre of petrol for good measure.

Over the course of six Budgets and Autumn Statements, he pushed through a series of delays and cancellations to the inflation-pegged rise, and wrapped the saving passed on to motorists into soundbites as oft-repeated as "Long-Term Economic Plan".

Here are two.

“Action on fuel duty since 2011 will save a typical motorist £675 by the end of 2015-16.”

“Due to government action on fuel duty since 2011, by the end of 2015-16 the typical motorist will save £9 each time they fill their tank.”

But HuffPost has used the Office for Budget Responsibility’s database to calculate how much this has cost.

The Chancellor will have lost £22.6 billion in fuel duty revenue by the end of 2015-16 and £28.9 billion in 2016-17

The Green Party, which wants the Government to promote more environmentally-friendly forms of transport such as the railways, argues the cost cannot be justified.

Its MP Caroline Lucas said: “Osborne’s fuel duty giveaway has been hugely costly for the public purse. Instead of repeatedly cutting the price of petrol for cars the Chancellor should have been focusing on making public transport more affordable for everyone.

“If the Government is serious about tackling climate change, and ridding our cities of the dangerous pollution in the air, then they should raise fuel duty and divert resources into cleaner, more environmentally sound forms of transport.”

Yet the Chancellor also faces the accusation that it hasn’t amounted to much despite its tabloid popularity.

Figures included in the 2013 Budget suggested that fuel prices would have been 18 pence per litre less than they would have been.

"Pump prices will be ... 18 pence per litre lower by the end of the Parliament."

The Treasury's latest figures suggest fuel duty is currently 17 pence per litre lower than it would have been under the previous Labour Government’s fuel duty plans.

By contrast, according to the RAC Foundation, prices at the pumps have fallen by over 24 pence per litre between 2011 and 2015.

The motoring group has calculated for HuffPost UK that drivers have saved £10.6 billion in the 18 months to December last because of falling oil prices.

Perhaps more damning is that three-quarters of what motorists pay on the forecourt still comes from tax.

In 2015, fuel duty generated an income of £27.4 billion for the Treasury - comfortably the biggest component of all duties and indirect taxes it levies.

The RAC Foundation concedes fuel duty has has been the same since 2011, but argues it still remains high at 57.95p a litre - underlining why the Chancellor’s apparently big gestures have done little to affect what people actually pay.

Add VAT of 20% slapped on top, and tax accounts for 74% of what motorists pay at the counter - the highest percentage since January 2009, the RAC Foundation says.

Steve Gooding, director of the RAC Foundation, told Huffington Post UK that Osborne should not contemplate a fuel duty hike on Wednesday.

He said: “It is true motorists have benefited recently from falling oil prices, however the biggest driver of what we pay at the pumps is not OPEC or the big oil companies but the Chancellor.

“The freeze in fuel duty has certainly helped motorists and hauliers but three-quarters of what we pay on the forecourt still goes straight into the Treasury’s coffers.

“In the unlikely event fuel retailers wanted to give petrol and diesel away for free they couldn’t. Motorists would still pay 69.5p a litre on the forecourts: 57.95p in fuel duty and 11.6 p in VAT.

“With the price of oil forecast to stay low the Chancellor might now be tempted to look at increasing fuel duty. We hope he does not.

“The cost of transport is already the biggest household expense bar none and a significant cost for business too. Will raising duty really get us – individuals and the economy – where we need to be?”

Popular in the Community