Chancellor Rishi Sunak has announced fuel duty will be cut by 5p a litre from 18:00 GMT this evening (Wednesday 23 March).
The fuel cut – which will be in place until March 2023 – was announced by the Chancellor in his Spring Statement at a time when prices have been reaching record highs.
Following the announcement, Asda has said it will be cutting fuel prices by 6p a litre from this evening, which includes a 1p VAT reduction.
AA research has revealed that in November – a time when petrol pump prices were at a record 148p per litre – 43% of drivers were either cutting down on how often they used their car, reducing their other spending or both to compensate for the rising costs. At the beginning of this week, petrol was averaging 167p a litre.
Commenting on the announcement, RAC head of policy Nicholas Lyes said: “With petrol and diesel prices breaking records almost daily, and the cost to fill up a petrol car at over £92 and a diesel at nearly £100, we’re pleased to see the Chancellor has given drivers some much-needed relief at the pumps, but the reality is that a 5p cut in duty is something of a drop in the ocean. In reality, reducing it by 5p will only take prices back to where they were just over a week ago. With the cut taking effect at 6pm tonight drivers will only notice the difference at the pumps once retailers have bought new fuel in at the lower rate. There’s also a very real risk retailers could just absorb some or all of the duty cut themselves by not lowering their prices. If this proves to be the case it will be dire for drivers. It also wouldn’t be totally unexpected based on the biggest retailers not reducing their prices late last year when the oil price fell sharply.”
“Temporarily reducing VAT would have been a more progressive way of helping drivers as the tax is applied at the point the fuel is sold, removing any possibility of retailers taking some of the tax cut themselves to increase their profits. It’s also the case that the Treasury is benefitting hugely from the high fuel prices because of greater VAT revenue. The Chancellor is currently getting 28p a litre VAT on petrol and 30p on diesel – this of course comes on top of fuel duty as VAT is a tax on a tax.”
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