Motorists have escaped an expected fuel duty rise, despite falling petrol and diesel prices.
George Osborne insisted families ‘shouldn’t be penalised’ for the state of the oil industry, which has been struggling since prices plunged.
The Chancellor had been expected to announce an increase in duty to help the beleaguered producers working in the North Sea.
Instead, he gave the oil and gas sector a series of tax breaks while refusing to pass the costs on to drivers.
George Osborne refused to increase the price of fuel for the sixth year in a row, file photograph
It was the sixth year in a row that the Chancellor has announced no change in fuel duty – the longest freeze for 40 years. It comes after a sustained campaign by MPs and motoring groups to cut the cost of living.
Mr Osborne claimed the freeze would result in annual savings of £75 for the average driver and £270 for a small business with a van.
Pump prices are now 18p a litre lower than they would have been if the Government had kept up the previous fuel duty escalator.
The escalator meant fuel duty was automatically increased above inflation and meant UK motorists faced some of the highest prices in Europe.
The average motorist today spends £450 less a year on petrol than they did in 2011 when the freeze began, according to Treasury calculations.
Experts pointed out, however, that three quarters of the price motorists pay at the pump is soaked up in taxes. A rise in fuel duty would have proved unpopular with families and with motoring groups.
In response to the announcement, Edmund King of the AA said: ‘We are delighted that the Chancellor has resisted the temptation to increase fuel duty which will bring relief at the pumps for millions of motorists.’
Charlotte Thompson, pictured, said freezing fuel duty was saving her family cash every week
David Bizley of the RAC said: ‘Motorists will be relieved that the Chancellor has not used low fuel prices as an opportunity to raise duty on petrol and diesel to help reduce the deficit.
‘But with the Government’s own evidence showing that lower fuel prices are good for the economy, we are disappointed Mr Osborne didn’t make a longer-term commitment to freeze duty beyond next year’s budget.
‘This would have been the ideal opportunity for the Chancellor to freeze fuel duty for the life of this Parliament and improve his already good record on fuel duty.’
Quentin Willson, of the campaign group FairFuelUK, described the freezing of fuel duty as ‘hugely significant’. RAC director Steve Gooding said: ‘With VAT and fuel duty already accounting for three quarters of the price motorists pay at the pumps, any increase would have been tantamount to the Chancellor deciding to drive people off the road. Instead this freeze will keep the economy moving and help the 60 per cent of people travelling to work by car.
‘Mr Osborne remains on course to collect more than £27 billion in fuel duty alone next year.’
Richard Burnett, chief executive of the Road Haulage Association, said the decision would ‘help retailers and provide a sound base for economic recovery’.
But Jason Torrance, of public transport charity Sustrans, warned ‘we can’t go on relying on private cars’.
He added: ‘Extra revenue from a tax hike could be used to plug the gap in shrinking council budgets, make rail fares cheaper and build better cycling infrastructure.’
Those with new company cars could pay more after the government announced tighter CO2 emission thresholds for capital allowances.
Tax on wine will wise, but beer gets a break
Duty on beer and cider has been frozen as George Osborne vowed to ‘back our pubs’.
However, the Chancellor said the tax on wine will rise in line with inflation.
He has cut duty on beer by 1p in the last three Budgets but a £4billion hole in public finances prevented any further cuts.
British beer drinkers already pay one of the highest rates of tax in Europe – 52p per pint in duty.
In his Budget yesterday, Mr Osborne said: ‘The action we took in the last Parliament on beer duty saved hundreds of pubs and thousands of jobs. Today I back our pubs again. I am freezing beer duty and cider duty too.’
Beer and whisky has escaped any duty rise but the chancellor has increased the price of a glass of wine
He also announced a freeze on whisky and other spirits, saying he wanted to back the Scotch whisky industry which accounts for a fifth of all the UK’s food and drink exports.
But wine and other alcohol will be dearer as taxes and duties rise in line with inflation. Miles Beale, of the Wine and Spirit Trade Association, said it was disappointing that 30million wine drinkers had been ‘singled out for a duty rise’.
He said: ‘The freeze in wine duty in 2015 has resulted in £118million extra in revenue to the Treasury in the last ten months, up 4 per cent, which makes it very unfair that wine has been penalised. We also deeply regret that the Government has missed this important opportunity to support the emerging English wine industry, which is a real home-grown success story that needs nurturing rather than being hit by another unfair tax increase.’
The Scotch Whisky Association welcomed the freeze, but chief executive David Frost said: ‘Tax is still 76 per cent of the price of an average bottle of Scotch and the majority of the British public think that is unfairly high.
‘We will continue to call for fairer taxation of Scotch, a vital UK industry, and we urge duty reductions in future years.’
Roll-ups targeted to deter young smokers
Tax on hand-rolled tobacco will rise by 5 per cent in an attempt to encourage young smokers to quit or cut down.
George Osborne’s duty increases will mean that a 30g pack of tobacco will go up by 44p. This compares with an above-inflation increase of 2 per cent on cigarettes, or 21p per pack of 20.
The Chancellor also announced an ‘effective floor’ on the price of cigarettes as part of reforms he hopes will raise £10million a year. The price rise for hand-rolled tobacco is designed to close the gap between ‘roll-ups’ and ready-made cigarettes.
Osborne also increased the price of tobacco and targeted roll-ups in an effort to deter young smokers
It will target young smokers, who turned to rolling their own after successive price-rises made it too expensive for many to buy ordinary cigarettes.
The volume of tobacco consumed as rollies has increased by 75 per cent since 2007 while the volume smoked through cigarettes fell by 28 per cent, according to official figures. The Tobacco Manufacturers’ Association warned that the Government’s ‘failing tax policy’ could encourage smokers to switch to black market cigarettes.
JTI, manufacturer of the rolling tobacco Amber Leaf, said tax rises would provide ‘another incentive for smugglers’ as it would ‘further widen the price between legitimate and illegal products’.
But Deborah Arnott of anti-smoking campaign group ASH welcomed the changes. She said: ‘The new tax structure will increase the effectiveness of taxation and encourage more people to quit. It will also help close the gap in health inequalities.’