Blog Driving us round the bend: another fuel duty freeze Fuel duty has been frozen for the 13th year in a row. When will the government abandon this regressive, environmentally damaging policy? By Alex Chapman 20 March 2023 The spring budget saw the chancellor freeze the rate of fuel duty for the 13th year running, a decision backed by both major parties. But the decision’s popularity with politicians does not reflect its popularity across civil society. The policy is widely regarded as economically inefficient and environmentally damaging.
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Driving us round the bend: another fuel duty freeze
Fuel duty has been frozen for the 13th year in a row. When will the government abandon this regressive, environmentally damaging policy?
20 March 2023
The spring budget saw the chancellor freeze the rate of fuel duty for the 13th year running, a decision backed by both major parties. But the decision’s popularity with politicians does not reflect its popularity across civil society. The policy is widely regarded as economically inefficient and environmentally damaging.
Freezing fuel duty at the level introduced last year (reduced by 5p) means a real-terms cut to how much of their disposable income drivers are spending on fuel, given inflation and wage growth. The net result of this freeze is likely to be an increase in the public’s consumption of fuel and, in turn, an increase in polluting carbon emissions.
At NEF, we’ve conducted analysis which has found that the likely increase in household fuel consumption over the next year will result in 3.4 to 3.9m additional tonnes of carbon dioxide being released into the atmosphere. This is equivalent to adding between 2 and 2.3m more cars to UK roads for a year. When compared to 2021, this increases road transport emissions by between 3.4% and 3.9%.
One comparison in particular shines a light on the inconsistency of this carbon-pumping announcement. Documents released alongside the spring budget reveal that, at the same time as it was making this £6bn investment into high-carbon fuel consumption, this government was receiving almost exactly the same amount — £6bn — from its carbon taxation mechanism, the UK Emissions Trading Scheme. We are taxing carbon with one hand and discounting it with the other.
To risk this exceptional increase in emissions in the midst of a climate emergency, the policy must have a compelling economic case. But it does not. We’ve found that, of the £3.4bn in fuel duty savings that households will make over the coming year, £2.2bn (or 64%) will accrue to households in the top 50% by equivalised income, while only £1.2bn (36%) will accrue to the bottom half. That’s almost two-thirds of savings going to the richest households, and just above a third going to the poorest.