AA calls for fuel duty freeze to protect UK economy

The AA is calling for the continuation in the freeze in fuel duty to protect household budgets, the voluntary care sector, the wider economy and drivers ahead of the Budget in October.

This call was part of The AA's Motoring Manifesto¹ which was sent to all parties pre-election and stated that the current freeze on duty should be retained as global prices remain volatile and any increase will hit individuals, businesses and fuel inflation. The AA concludes that nothing has changed since the result of the election.

Overwhelming evidence from The AA, academic research and a volunteer sector losing essential private drivers by the day, paints a picture of devastating impact on the economy and society's most vulnerable if fuel duty goes up in the budget.

Research by the AA carried out last month shows that by far the hardest hit if the Chancellor increases fuel duty are low income households, where more than half (55%²) say they are worried about the price of fuel in general, while more than two fifths (45%) say they are concerned about a prospective rise in fuel duty.

This concern is backed up by academic research from East Anglia University³ that shows less well-off households spending as much as 20 per cent to 30 per cent more of their disposable income on petrol.

Economically, the impact is not only from higher transport costs pushing up consumer prices, and therefore fuelling inflation, but the siphoning off of potential consumer spending into the Treasury's coffers. This does not help economic growth the Government says it wants to revive.

Any increase would:

• Hit the least well-off, most vulnerable, rural and disabled
• Be a drain on consumer spending that undermines growth
• Pump up inflation at a time of high interest rates
• Hit those dependent on charities and volunteer help/transport seeing helpers drift away because fuel allowances don't meet current costs already and a fuel duty increase will make worse
• Undermine community support that helps to keep people out of hospital / makes them less likely to go in
• Mean the NHS having to direct more resource towards patient transport

HMRC Hydrocarbon Oils Bulletin data⁴ shows the UK consuming 46.4 billion litres of petrol and diesel in the last financial year. A 5p increase in fuel duty would switch more than £2.3 billion from potential consumer spending to the Treasury – and that's before adding the additional 1p per litre in VAT that would be added to a 5p fuel duty increase (extra fuel duty paid by haulage and other commercial activity would be passed on to customers)

As it is, the Government enjoys a 20% VAT from the majority of consumer spending on private transport. That includes £57.4 billion spent on the purchase of cars and £78.6 billion spent on the ‘operation of personal transport' in 2023, according to the ONS. By far the majority of spending on the last category will have been on cars.

Perhaps worse still for many of the most vulnerable in UK society is the loss of volunteer drivers for health support, community services and charities. According to the Community Transport Association:

“The current AMAP rate does not reflect the real costs of motoring in 2024, leaving volunteers out of pocket, threatening the future of voluntary services and the people who depend on them, those who are most in need of support.”
AMAP-Spring-Budget-Representation-CTA-2024.pdf (ctauk.org)

Edmund King, AA president. said; “Scrapping the 5p freeze in fuel duty would hurt everyone, not just drivers. Everything from the price of food in supermarkets to the delivery of social care within our communities are impacted by pump prices, and an unnecessary hike in fuel duty could make things worse.

“As well as being ‘the voice of the motorist', The AA understands the wider impact any rise in fuel duty has on the wider economy. Household budgets are already stretched and everyone benefits from a temporary suppression in fuel duty. Even households without a car feel the benefit of discounted fuel duty through cheaper bus fares and more affordable goods from supermarkets.

“Much has been made of the margin of fuel retailers, and while there are examples of some outlets collecting higher than necessary profits, most small and independent forecourts are struggling to keep their heads above water compared to 2017. The best way to ensure fair pump prices is to complete the initial good work of the Competition & Markets Authority (CMA) to legislate that all fuel retailers must publish their prices.

“We don't deny there are tough choices for the Chancellor to make in October, but hiking fuel duty could backfire on working people and fuel inflation. The recent National Travel Survey⁵ shows that outside of London, 70% commute by car to work and this increases to 81% in rural areas. The car remains an essential form of mobility and affordable road transport is essential to the health of the nation.”

ends

NOTES TO EDITORS

1. aa-motoring-manifesto-2024.pdf (theaacorporate.com)

2. Yonder received 11,453 responses from AA members to its online poll between the 12th to 19th August 2024 Yonder is a member of the British Polling Council and abides by its rules.

3. Do the poor pay disproportionately more for increasing market concentration? A study of retail petroleum markets — University of East Anglia (uea.ac.uk)

4. Hydrocarbon Oils Bulletin - GOV.UK (www.gov.uk)

5. NTS 2023: Introduction and main findings - GOV.UK (www.gov.uk)