Chancellor Jeremy Hunt confirmed that fuel duty will remain at its current rate for the next 12 months in the Budget today (6 March).
Hunt also pledged to extend the 5p cut on fuel duty, which was due to end this month.
The Treasury has previously said that the freeze on fuel duty has saved motorists around £10bn over two years since 2022, and around £200 for the average driver.
The Institute of Fiscal Studies (IFS) estimates that continuing the fuel-duty freeze would cost £6bn in 2027-28.
Gemma Woodward, head of responsible investment at Quilter Cheviot: “No Conservative Chancellor has dared get on the wrong side of motorists by announcing they’ll hike the duty and today ushers in no change in that policy.
“There was talk that the Chancellor would finally bite the bullet and increase the duty, but this has been shelved. In this current economic environment, with fuel prices still remaining high, it’s no surprise to see Hunt swerve the issue for yet another budget.
“But if the government is serious about reaching net zero by 2050 and is serious about incentivising the switch to electric vehicles, then they’ll need to take a long hard look at the taxes on motoring. Fuel duty freezes are unlikely to help encourage people to make the switch.”
Reality has been staring him (and all governments) in the face. The EV industry makes valiant attempts to put lipstick on a pig, trumpeting that EV sales increased by 35% in 2023 over 2022 – with 14 million EVs being sold worldwide. However, the total number of cars sold in 2023 was 75.3 million, so EVs still represent a pretty small proportion. The share price of Tesla is down by 26%. The draft manifesto of the European People’s party now opposes an outright ban on ICE vehicles. In the US new and used EVs are sitting in showrooms for longer than their petrol rivals. VW reports that EVs made about 8% of sales down from 11% the year before. Ford & GM are among car makers that have delayed EV and battery plant construction over the past year. All this points to wariness over EVs. Put this beside OPEC anticipation which expects demand to rise twice as fast in the next 5 years, and then to keep rising for at least the next two decades. Sure, they could be wrong, but would you bet on it? Brazil is projected to be the fourth largest oil producer in this decade and they are spending significant amounts developing their off-shore oil reserves. Meanwhile Venezuela has the largest known oil reserves in the world. They are hardly likely to just leave it in the ground. Just remember it was our savvy government that encouraged us (with hefty tax breaks) to buy diesel. It is hard enough to project the future with any certainty, particularly in the light of innovation and scientific progress. Major companies (and several governments) are spending significant amounts on developing synthetic fuels and France has already permitted bio-fuel. Are we going to be left in the dust by our home-grown Luddites? Sure, climate change is a concern, but there needs to be a realistic view on the cost involved and the potential detriment to economic competitiveness.