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VED And Fuel Duty Freeze

Some good news for the motor trade sector in the recent 2021 UK budget which has been well received by the industry, as well as many private and commercial drivers. The chancellor announced a freeze in fuel duty at the same time as extending the furlough scheme, fuel duty will remain frozen at 57.95p a litre for 2021-22.

After announcing the government’s plans to help businesses and people recover from the impact of Covid-19 in his budget speech at the House of Commons, Mr Sunak tweeted “as a result of eleven years of freezes, the average car driver will have saved a cumulative £1,600”.

The Chancellor followed on to say: “Right now, to keep the cost of living low, I’m not prepared to increase the cost of tank fuel. So, the planned increase in fuel duty is also cancelled.”

An RAC spokesperson said: “Drivers will breathe a sigh of relief that the Chancellor has decided not to ‘rock the fuel duty boat. We feared this would only pile further misery on drivers at a time when pump prices are on the rise and many household incomes are being squeezed as a result of the pandemic.

Many drivers see their cars as a safe way to carry out essential journeys and believe having access to a vehicle is even more important as a result of the pandemic.

If the Chancellor had raised fuel duty, he could have risked choking any economic recovery as it would have led to increased costs for consumers and businesses.”

The 2021 -22 freeze in fuel duty will cost the Treasury around £795m, rising to £885m the year after, and over £945 million by 2025-26.

However, after the eleventh consecutive year fuel duty has now been frozen, there is no insurance policy that the freeze will last beyond this initial period, as the Treasury did mention future fuel duty will be considered in the context of the UK’s commitment to reach net-zero emissions by 2050.

Sir Mike Penning MP, chair of the All-Party Parliamentary Group (APPG) said: “Freezing fuel duty will be a real boost to Britain’s hauliers who have been the unsung heroes of the pandemic, but the Chancellor must go further and investigate the need for an essential user rebate for UK hauliers.

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Our haulage industry will be vital to our economic recovery and the Chancellor must ensure that they are not held back by paying highest rate of fuel duty in Europe.”

Road pricing was not mentioned as a potential replacement for fuel duty, but the budget did contain an announcement around a series of consultations the Government will launch later this year about tax policies and consultations.

Motor trade Independent Garage Association chief executive said: “There are hard times ahead for independent garages. A significant decline in MOT work is expected from April to June, where motorists took advantage of the MOT extension last year”.

While Sue Robinson, chief executive of the National Franchised Dealers Association from the motor trade industry said, following its requests for a business rates holiday extension: “today’s announcement is positive, as it will continue to support retailers while the economy reopens, and we come out the pandemic”.

The average price of fuel rose by 3p per litre across February 2021, making a tank of unleaded £1.70 more expensive than it was at the beginning of the month.

The average cost of a litre of petrol is currently 123.38p, while diesel is 126.47p.