Millions of drivers may face increased costs at the petrol pump as incoming Prime Minister Andy Burnham reportedly seeks funding for his commitment to build a significant number of council houses. Sources close to Burnham have not ruled out the possibility of his government increasing fuel duty in the new year and subsequently linking it to inflation for annual rises. This potential move comes as Burnham has pledged to uphold Labour's manifesto commitment to not increase income tax, National Insurance, or VAT.
The uncertainty surrounding Burnham's funding plans has fueled concerns that motorists could bear the brunt of his spending initiatives. Burnham has promised to build the largest number of council houses since the post-war era and to overhaul social care, but details on how these ambitious plans will be financed remain undisclosed. His press team has repeatedly declined to comment on specific tax and spend strategies.
Fuel duty is currently frozen until January, a freeze that has been in place for over a decade. The incoming administration faces the decision of whether to continue this freeze or implement an increase. The 5p per litre cut in fuel duty, introduced by the previous government in 2022, is also set to expire on January 1. If this cut is not extended, the cost of filling a vehicle could increase by over £3 per fill-up.
Tory shadow transport minister Greg Smith criticized the potential tax increases, stating, "We are already massively over taxed at the pumps. Labour needs to understand that driving isn’t some luxury - it is vital for everyday life. Hammering people at the pumps helps no one."
Howard Cox, founder of the FairFuelUK campaign, expressed distrust in Labour's approach to fuel costs, remarking, "Frankly, I don’t trust Labour to support drivers or to reduce fuel costs in a sensible way to fight inflation and support economic growth. Their traditional short-termism, in fleecing drivers, remains at the heart of their fiscal DNA."
The average price for a litre of petrol is currently 152.54p, and diesel is at 167p. These prices are approximately £10 more expensive per fill-up compared to before the recent conflict involving Iran, adding over £100 annually to the average family's fuel expenses. Prices had briefly decreased following a US-Iran ceasefire announcement in June, but have been rising again in recent days after the ceasefire broke down.
Simon Williams, a fuel expert at the RAC, noted the upward trend in pump prices, stating, "Sadly for drivers - many of whom will be about to depart for a much-needed break - prices at the pump are on the rise again. Since hitting a three-month low on 6 July, petrol has already gone up 2p while diesel has jumped 2.5p in just over a week."
Burnham, who was installed as Labour leader today and is set to assume office on Monday, has given little indication of his fiscal strategy, including his tax and spending plans, during public addresses. He has faced criticism for limiting scrutiny of his plans so close to taking office. Parliament is currently in summer recess, meaning he will not face MPs for several weeks.