The rate of fuel duty will be held constant at 52.95p per litre until July 2027, the chancellor has announced at the Budget.
According to the Budget document:
“The government will extend the temporary 5p-per-litre fuel duty cut for a further six months to 1 July 2027. The government is also deferring the planned RPI inflation increase to 1 July 2027.”
There was due to be a 3p per litre increase on 1 January 2027 followed by a 2p increase on 1 March however that will not now take place. This was to reinstate the 5p cut made to duty in 2022 after the Russian invasion of Ukraine. A cost of living increase was then scheduled for 1 April 2027.
The RAC Foundation calculates that an additional £10.3 billion has now been paid at the pumps since the start of the conflict in the Gulf over and above what might have been expected had petrol and diesel prices stayed roughly the same as they were before the war.
Of the £10.3 billion, £1.72 billion is VAT though some of this is likely to be reclaimed by VAT-registered businesses.
Steve Gooding, director of the RAC Foundation, said:
“The chancellor said cheaper energy is his top priority but that doesn’t seem to include the energy sold at the pumps – petrol and diesel. Delaying a planned hike in fuel duty is welcome, but falls some way short of actually making the cost of refuelling cheaper. Meantime the Treasury will still pocket getting on for half of everything paid on the forecourts.
“The war in the Gulf has already cost drivers an extra £10 billion and it unfortunately looks set to cost billions more in the months ahead.”
Even with the continued fuel freeze 47% of what is paid at the pumps for petrol is tax (a mix of fuel duty and VAT) whilst for diesel it is 43%.
Contacts:
Philip Gomm – Head of External Communications – RAC Foundation
[email protected] | 07711 776448
Notes to editors:
The RAC Foundation is a transport policy and research organisation which explores the economic, mobility, safety and environmental issues relating to roads and their users.
It is a registered charity. Charity number: 1002705.
The Foundation publishes independent and authoritative research with which it promotes informed debate and advocates policy in the interest of the responsible motorist. For more information visit www.racfoundation.org