MPs call for UK government to do more on soaring fuel costs

In late March, chancellor Rishi Sunak announced a 5p-per-litre cut in fuel duty, to last 12 months, in an effort to reduce prices at the pumps. But the measure has been widely condemned as a failure, having not compensated for sustained price increases as a result of the war in Ukraine and other external factors.

In a statement, the Petrol Retailers Association explained: "Forecourts have passed on this cut; consumers haven't felt it at the pumps because prices have since risen. Forecourts have also had to contend with recent cost-of-living increases, such as increases in electricity costs and in the national minimum wage.

Indeed, Antoniazzi was quick to condemn the existing measures: "When the Chancellor set out a cut of 5p per litre in his spring statement, we didn't think it would make much of a difference. It hasn't even scratched the surface. In fact, last week, there were newspaper reports of this cut barely being passed on to the customer at the pumps."

Patricia Gibson, SNP MP for North Ayrshire and Arran, said that the record for petrol and diesel costs has been broken on 26 separate days so far this year.

She went on to explain that consumers currently pay more than 80p in tax on every litre of fuel and criticised the government for maintaining current VAT rates. 

"The Treasury is raking in 20% of the total cost at the forecourt, with fuel price increases bringing in additional VAT, amounting to billions of pounds, all of which is helping to accelerate inflation," said Gibson. 

"As the cost of fuel has risen, so has the VAT being raked in by the Treasury – vast additional revenue for the Chancellor."

A cut in VAT would be more effective than slashing fuel duty, she said, because that tallies with the total cost of petrol and diesel, rather than the fixed 50p-per-litre fuel duty cost. 

"The dithering and delay must end. Halving VAT on fuel will have an immediate and positive impact."

Responding to MPs on behalf of the government was Helen Whately, exchequer secretary to the Treasury, who acknowledged the concerns of UK motorists.

"I represent a rural constituency [Faversham and Mid Kent], and I know that for most people in my constituency, there's no alternative to going by car for most journeys," she said. 

"As honorable members have said, whether it's getting to work, doing the school run, going to the supermarket, the doctor or the dentist or visiting family, there's usually no alternative. 

"If we add to those journeys all the business journeys – the man in a van, delivery drivers, logistics and so on – we can see that so much of our economy is reliant on road transport."

But she said the government has "stepped in to help, with support measures that add up to £22 billion" and argued that "as these circumstances aren't unique or specific to the UK, so they can't be solved by the UK alone". 

"Prices at the pump are not set by the government and nor are crude oil prices more widely, but the government have taken action to help people with recent unprecedented price increases", Whately said, drawing attention to the 12th consecutive year of a fuel-duty freeze and the 5p cut in fuel duty announced in March. 

Responding to Labour MP for Ellesmere Port and Neston Justin Madders' suggestion that "the Chancellor has raked in more through increased VAT receipts than he has given away in this fuel duty cut", Whately explained that the fuel-duty cut effectively also amounts to a reduction in VAT.

"Given that VAT is applied on top of fuel duty, the 5p duty cut on petrol and diesel also results in a VAT reduction. It effectively translates to a reduction of 6p per litre overall.

"That said, a VAT reduction isn't generally the best way to provide help with fuel costs, particularly because it wouldn't help many businesses, many of which already claim back VAT paid on fuel for business use. 

"About 40% of fuel is used by businesses. If we had just focused on reducing VAT instead of fuel duty, that would have left businesses more exposed to fuel price increases, in turn impacting the cost of goods for consumers. Making the focus fuel duty rather than VAT means that businesses, as well as consumers, will benefit from that tax cut."