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The Chancellor’s decision to freeze fuel duty comes as a welcome relief to the Trusted Dealers and also to all those motoring groups who have campaigned tirelessly over the expected fuel duty increase.
Interestingly, the planned increase was less than expected as Treasury documents published alongside the budget revealed that the rise was only due to be 1.89p in September as opposed to the widely anticipated 3 pence.
The Trusted Dealers welcome the decision citing that although the freeze does not have the capacity to reduce the costs for motorists, it will at least prevent fuel costs from rising to astronomical levels in the near future.
The decision comes after motoring groups and backbench Tory MPs argued that the high oil prices of the past few years were already adding to the high costs of driving. Today’s budget announcement will ensure that duty on a litre of unleaded petrol or diesel will remain at 57.95p until at least September 2014.
This deferral is likely to cost the Treasury around £1bn in lost revenue over the next year if based on past official estimates, but as motoring lobbyists have pointed out, in 2011 the VAT rise increased the government’s tax take on fuel by around 60%, or 83p, so it is perhaps time that motorists received their break.
George Osborne has already cancelled rises due under the “fuel duty escalator” which was originally put in place by the previous Labour government. In the last autumn statement he scrapped an increase he had already deferred until January, and now it appears he may freeze fuel duty rises throughout this parliament.
Motoring organisations who welcomed the announcement include Professor Stephen Glaister, the director of the RAC Foundation, who said:
“This news provides breathing space for families being smothered by the soaring costs of motoring, especially the 800,000 households spending more than a quarter of their income on operating a vehicle.
“Through this move the chancellor will lose about £1bn a year in duty and VAT income, but tens of thousands of people will be saved from being forced to give up their cars against a backdrop of generally rising running costs.”