The government has agreed that its decision to freeze taxes on fuel have helped drivers to keep more money in their pockets and reduces expenses for logistics businesses.
A report from the Treasury, titled Analysis of the Dynamic Effects of Fuel Duty Reduction, has been released to explain how its decision to freeze fuel duty has helped the economy. At present, tax on petrol and diesel is charged at 57.95p. When VAT is added to fuel duty then it makes up close to 60 per cent of the final price paid at the pump.
The Treasury found that by not increasing fuel duty, this left consumers with more money to spend as they wish. It felt that this is good for the economy as this spending made up for the money lost from increased fuel duty by going into VAT instead.
Freight and logistics organisations welcomed the report into the benefits of freezing fuel duty as many had been calling for this decision, as well as cuts to the tax, for a long time.
The Road Haulage Association said that the report was in line with the study it funded the National Institute of Economic and Social Research to complete as part of their FairFuelUK campaign.
Similarly, the Freight Transport Association (FTA) was pleased that the Treasury had "finally caught up" with its advice on fuel duty.
Previously, the FTA had claimed that every penny of fuel duty costs £116 million a year for commercial vehicle owners on average. It now hopes that this finding will lead to the government going a step further and reducing fuel duty.
Chief executive of the FTA Theo de Pencier said: "FTA is pleased that the Treasury has accepted our key arguments that fuel duty can be cut without harming the economy. From the conclusions in this report today, it does appear as though the Chancellor has caught-up with our findings, and there is now every chance for him to go further and boost growth by cutting three pence per litre from current rates."
Posted by Danielle Barge