Fuel duty freeze set to be extended again in budget

Chancellor Jeremy Hunt is set to extend a 5p cut in fuel duty in his pre-election budget on Wednesday, Sky News understands.

Such a move in the spring budget, which would be welcomed by motorists across the UK, would cost the Treasury around £5bn to implement.

The “temporary” fuel duty cut was introduced by Rishi Sunak in 2022, and was due to expire this month.

It was extended for 12 months in March 2023, and Mr Hunt looks set to do the same tomorrow.

Other reports suggest the chancellor is considering a 2p cut in National Insurance, on top of the previous tax cut he made in the autumn statement.

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Stated government policy is that fuel duty should rise in line with inflation, but this has not happened since 2011.

And in 2022, when then-chancellor Mr Sunak announced a further 5p would be cut from fuel tax in a bid to bring prices down, it was initially supposed to last a year, but was extended last spring and is set for another stay of execution.

The continued implementation of what is supposed to be a temporary freeze has been criticised by economists and official forecasters for making it difficult to accurately predict the impact of budgets.

There are also concerns the 5p cut is being used by retailers to boost profits.

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The RAC claimed last December that retailers had made an extra £184m from motorists in the preceding two months alone by not passing the 5p cut on to consumers.

Freezing fuel duty and keeping the further 5p relief would allow Mr Hunt and the Conservative government to sell the changes as a tax giveaway ahead of the next election.

This budget will set the fiscal stage for the next nationwide vote, with the Conservatives wanting to see Mr Hunt cut taxes in a bid to overturn the party’s dire polling compared with Labour.

But high interest rates on government debt and low growth mean there is little room for financial manoeuvrability.

The chancellor has already indicated public service funding may suffer in order to point the UK in a direction of lower taxes.

As well as fuel duty, Mr Hunt is believed to be eyeing a potential cut to National Insurance.

Reducing this levy is cheaper than cutting income tax as fewer people pay it – but it also means that those who don’t pay NI won’t see a benefit, including the key Conservative demographic of pensioners.

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Another mooted policy is changing the non-dom tax status, something Labour has been talking about for a long time.

Shadow chancellor Rachel Reeves criticised the Tories for “pickpocketing the Labour Party of its policies” following the speculation, telling Labour MPs on Monday the chancellor “is cynically talking up maxing out headroom to pay for pre-election promises – I see through it and so do the British people”.

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