Scrap the 5 cent fuel duty cut because drivers are missing out on savings, RAC says

The RAC has called for the 5p fuel duty cut to be scrapped because motorists are not benefiting as intended.

The cut, introduced in 2022 to ease the cost of living crisis, costs the Treasury £2 billion a year but has not translated into savings at the pump for drivers. The auto group accused fuel retailers of pocketing the exemption, leading to record high profit margins of 13 cents per liter on unleaded and 15 cents on diesel, compared to pre-pandemic margins of 8 cents.

Simon Williams, head of policy at the RAC, criticized the largest retailers for keeping prices high, saying: “The refusal of the largest retailers to lower their prices to fairer levels continues to cost drivers dearly, and it is All the more outrageous when you factor in the fact that we are all meant to benefit from a temporary 5 cent reduction in fuel duty.”

The cut was introduced by then Chancellor Rishi Sunak in response to rising fuel prices following Russia’s invasion of Ukraine, intended to save motorists 6p per liter once VAT was included. However, sharp increases in wholesale oil prices quickly wiped out these savings. Although wholesale prices have fallen significantly since then, retail profit margins remain high, indicating that motorists are still not seeing the intended benefits of the duty cut.

Fuel duty currently accounts for 52.95p of the cost of a liter of fuel, down from 57.95p before the cut, which has been frozen since 2011. Williams says the Chancellor should reverse the cut in the October budget and cut duty to 58p per litre, highlighting that the 5p reduction is costing the government billions while drivers are paying too much. According to the Competition and Markets Authority (CMA), motorists were overcharged by £1.6 billion last year due to inflated margins.

“We normally oppose any increase in duty, but we have long said that drivers are not benefiting from the current discount due to retailers’ much higher than average margins,” Williams added. The RAC is urging retailers to adjust their prices to reflect lower wholesale costs, calling for average petrol prices to fall from 142 pence per liter to 136 pence, and diesel from 147 pence to 139 pence.

However, the Petrol Retailers’ Association has disputed these claims. Executive Director Gordon Balmer argued that the RAC’s focus on historical margins does not take into account the rising costs retailers face, including rising interest rates, energy prices, crime and labor costs.

Further analysis by the AA found that while fuel prices have generally fallen over the summer, motorway service stations have been slow to adapt, leaving prices high. Luke Bosdet, the AA’s spokesman on pump prices, criticized motorway service areas for their persistently high rates: “Pump prices in motorway service areas continue the tradition of being almost completely uncompetitive – the consistency of exorbitant prices on and down on the big network is breathtaking. to take.”

The CMA pump price transparency system, which will move from a voluntary to a statutory scheme, is expected to shed light on fuel pricing practices and potentially provide more competitive options for long-haul drivers. However, it remains uncertain whether this will lead to significant changes in the highway service areas.

As the debate continues, the RAC’s call to scrap fuel duty cuts is putting pressure on the government to reassess the effectiveness of the measure, amid growing frustration that the targeted savings are not reaching motorists.