Budget 2016: What it Means for Motorists
In his 2016 Budget, the Chancellor made the surprise announcement that fuel duty will be frozen, saving the average driver £75 per year. The Chancellor has announced in yesterday’s Budget that fuel duty will be frozen for the sixth year in a row, despite many experts predicting it would be increased. George Osborne said that the move, which was greeted with cheers in the House of Commons, would save the average driver £75 per year, or £270 for small business owners with a van.
At present, petrol, diesel, biodiesel and bioethanol are charged at a rate of 57.95 pence per litre, which accounts for around half of the price of petrol and diesel now that oil prices have fallen from as much as £1.40 per litre a few years ago to about £1 per litre today.
Given the fall in prices at the pumps, which have been enjoyed by the UK’s 38 million motorists, some had speculated that adding a small rise to fuel duty over the rate of inflation would raise billions for the Treasury.
But instead Mr Osborne announced that the freeze in fuel duty increases would remain in place. “We froze fuel duty throughout the last Parliament – a tax cut worth nearly £7 billion a year. In the last twelve months, petrol prices have plummeted. That is why we pencilled in an inflation rise. But I know that fuel costs still make up a significant part of household budgets and weigh heavily on small firms. Families paid the cost when oil prices rocketed; they shouldn’t be penalised when oil prices fall,” Mr Osborne said.
Other news that will affect motorists includes that from 2018 tolls on the Severn crossing between England and Wales will be halved, which at today’s rate would bring the cost down to £3.30 for a car. The green light was also given for a tunnel road to be built between Manchester and Sheffield, for the M62 to be made into four lanes and for the A66 and A69 to be upgraded as part of what the Chancellor describes as the Northern Powerhouse. In addition, an increase in insurance tax of 0.5 per cent is likely to push up premiums slightly.
Commenting on the Budget, Steve Gooding, director of the RAC Foundation, said: “Transport is the biggest area of household expenditure bar none, but 38 million drivers will be relieved it didn’t just get bigger still. And the Chancellor will hardly be out of pocket. As it stands, tax on petrol and diesel still accounts for about 75 per cent of the pump price and Mr Osborne remains on course to collect more than £27 billion in fuel duty alone next year.”