Fuel duty escalator scrapped in Budget 23 March 2011

The chancellor has announced that fuel duty will be cut, vehicle excise duty on HGVs is frozen and the fuel duty escalator is to be scrapped – a move which industry says will bring relief for commercial vehicle operators.

George Osbourne said that fuel duty will be cut by 1p per litre from 6pm today (23 March) and said the government is abolishing the fuel duty escalator, replacing it with a 'fair fuel stabiliser'.

The stabiliser will work by raising fuel duty in line with inflation when oil prices are high and lowering it when oil prices drop. The precise figure has yet to be determined above/below which the changes will take effect, though the chancellor suggested it could be in the region of $75 a barrel.

In addition, he said, vehicle excise duty rates for HGVs have been frozen for 2011/12.

The Society of Motor Manufacturers and Traders (SMMT) said the cancellation of the fuel duty escalator was "a very welcome move". It said that the abolition, together with the 1p duty reduction, would "particularly benefit the commercial vehicle and haulage sector".

Gordon Scott, MD of logistics operator Wincanton, commented: "Wincanton welcomes today's announcement, on behalf of the industry and its customers. It is clear that the current economic conditions will continue to impact us all, but in the face of rising costs and uncertain market conditions it is reassuring to see that the government has acknowledged the critical impact that rising fuel prices can have on businesses and the public alike. "

However, added Scott, the logistics industry needs to develop longer term solutions to head off sustained cost pressures: "To this end, we are now calling on the government to allow our industry to use longer trucks on UK roads. The take up of these vehicles by the industry could result in fuel savings of £1.8 billion annually. These savings are poised to come at a crucial time, as the industry searches for a solution to mitigate against rising costs. But, this change requires new legislation before we can offer it as a viable option."

Laura Cork

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