UK Think Tank Urges Fuel Duty Hike Amidst Public's Cost of Living Concerns

A prominent UK think tank, the Resolution Foundation, has recommended that Chancellor John Healey increase fuel duty, a proposal that conflicts with widespread public pleas for relief at the pumps. The think tank argues that continuing the freeze on fuel duty should not be a government priority, asserting that it disproportionately benefits wealthier individuals.

Despite current fuel prices, with diesel exceeding £2 a liter and petrol at £1.75 per liter due to ongoing disruptions in the Middle East, the Resolution Foundation suggests that fuel duty should be gradually increased. They propose a strategy of "little and often" increases, moving from the current rate to 58p per liter by 2028 and 66p per liter in five years. This recommendation stands in contrast to the current plans which include a 3p per liter rise on January 1, a 2p rise in March when a 2022 cut is set to expire, and a further 1p increase in April as a 16-year freeze is scheduled to end.

While Chancellor Healey is widely expected to extend the fuel duty cut and freeze as part of measures to address the cost-of-living crisis, the Resolution Foundation contends that such extensions are not well-targeted. They point out that higher-income households tend to spend more on fuel, and that the cuts have diminished government revenue and weakened incentives to reduce fossil fuel consumption.

Critics of the think tank's proposal argue that it is out of touch with the realities faced by working people who rely on vehicles for essential travel, including commuting, transporting children, and visiting family. Furthermore, concerns have been raised that increased fuel taxes would lead to higher costs for essential goods and services, as virtually all products are transported by road. This perspective highlights that drivers have for years been a significant source of revenue for the Treasury through fuel duty and VAT, with perceived little return in benefits.