MOST governments rarely assess the long-term results of their money decisions.
Nowhere is this more evident than in fuel prices.
Last month the Office for Budget Responsibility dropped a bombshell on 37 million motorists – the March 2023 Budget will see fuel duty rise by 23 per cent (equivalent to around 12p plus VAT).
And despite the constant outcry from already overburdened drivers, the government seems to be sticking to it.
At this week’s parliamentary liaison committee on Tuesday, Prime Minister Rishi Sunak refused to deny that fuel duty will rise, confusing millions of voters and losing even more Tory support.
The cost of this is staggering – the annual cost for a typical van driver would be an extra £1,000. For a heavy truck driver, that’s a whopping £7,000.
I commissioned a group of highly qualified economists to assess the impact of the tax hike on the world’s highest-taxed drivers – us.
And their conclusions are damning.
The pointlessness of even increasing fuel duty is clear to most of us.
But not to those special government advisers in green lycra who see increased taxation and vehicle bans as the only way to save the planet.
The widely respected gurus at the Center for Economic and Business Research have concluded that any increase in fuel duty would generate far less net revenue than the OBR expects.
In fact, a 23 percent tax increase would cause unimaginable economic damage, reducing our GDP by about one percent over time and reducing employment by about 31,000 jobs.
And that would be just the beginning of the government’s path to an economic apocalypse of its own making.
Why would Chancellor Jeremy Hunt approve a tax hike that would shrink the economy and add more people to the bailout queue?
Worse, Sunak’s anti-inflation mantra when he campaigned for prime minister would be blown to bits.
Inflation would actually rise by a dizzying 2.3 percent, according to CEBR calculations.
An increase in fuel duty would also hit the poorest drivers the hardest. As a share of their income, motorists in the poorest ten percent of the population spend more than twice as much on fuel as the rich.
The amount of fuel bought in London falls as car use falls.
Londoners spend two-thirds less on petrol and diesel than the rest of us.
As a result, the increase in fuel duty is very much a tax imposed by London on the regions.
Basic vehicle users, especially white van drivers and truckers, have already been hit hard in the government’s breakneck Net Zero push.
The effects of the increase in fuel duty will hit critical sectors that already feel they have faced an excessive increase in their burdens due to ill-informed decision-making.
With the growth of online business, vans and all forms of logistics are vital to the economy and the fight to reduce the cost of living crisis.
They are the most important life force for the well-being of our nation.
The increase in van drivers’ workloads has already begun to affect their willingness to service new and existing customers.
If this continues, a critical link in the service chain and our commercial lifeblood will break.
The heavy goods vehicle sector is also already in a delicate situation.
The average age of a truck driver is 53, and 13 percent are over 60.
Only two out of 100 drivers of heavy goods vehicles are under the age of 25.
Their profit margins are estimated at one percent at best.
The number of operator owners is also declining.
It is possible that the increase in benefits is the last straw.
And there’s more bad news.
The Competition and Markets Authority has found that the 5p cut in duty announced in the March 2022 Budget has not been fully passed on.
As The Sun reports today, garages turn a profit just as we head off to visit our loved ones on holiday. Happy Christmas!
Despite the recent freeze and ineffective 5p cut, UK diesel taxes are still the highest of any major European economy, while petrol prices are close to the most expensive.
Thanks to the FairFuelUK campaign in partnership with The Sun, the fuel duty freeze policy, which has been in place since 2011, has been a huge success, reducing CPI by 6.7 per cent and boosting household spending by £24bn.
If this did not happen, the recession would be even deeper and inflation would be even higher.
So, Chancellor, cutting fuel duty has proven successful – it would be bizarre to reverse it.
I’ll make it simple for you Treasury “experts”: cutting fuel duty will boost the economy, knock down inflation and restore public confidence, and maybe even help prevent the government from going to the opposition benches.