FairFuelUK (FFUK) has published new research "that blows the current thinking around fuel duty out of the water", according to the head of the campaign.
The CEBR report, Assessing the Impact of Lower Prices on the UK Economy, has revealed that the lower petrol and diesel prices of 2015 have raised UK GDP by 0.6%; created an extra £11.6bn of economic activity; 121,000 jobs and boosted government tax revenues.
The research also shows that raising duty on diesel or increasing VED on diesel vehicles would cost businesses and families £9.3 billion across the current Parliament.
The CEBR has claimed haulage companies will have saved £7,200 a year on the cost of operating a 44-tonne truck in the past year after the fall in the price of Brent crude oil since June 2014 (from $110 – £72 – a barrel to below $50 as of October).
The report concluded that given increased levels of economic activity (including job creation) the effect of lower fuel pricing is positive in terms of tax receipts. The authors added that this is something that will accrue.
Lower tax brings benefits
CEBR director, Oliver Hogan, said: "While the continuation of the fuel duty escalator would have brought in additional indirect taxes over the past year, the government would have been trading off the boost to economic activity and jobs for increased tax revenues.
"Given the fragility of the economic recovery, this would in hindsight have been an unwise policy."
Howard Cox, head of FFUK, which is pushing for a 3ppl cut in fuel duty in next week's Autumn Statment, added: “‘The Tory’s characteristic mantra of lower taxes benefitting the economy is enormously strengthened in CEBR’s report for FFUK.
"The chancellor now has tangible proof that cutting duty will definitely generate more tax revenue to the exchequer via its resultant growth stimulus to GDP and jobs. There is now no monetary risk Mr Osborne in cutting duty on all fuels."
FFUK spokesman Quentin Willson said: “This is an historic piece of research because we’ve busted the myth that high fuel taxes are good for the economy. The truth is exactly the opposite.
“We’ve proved low fuel costs stimulate consumption and the net receipts to the Treasury are actually up. The government’s fuel duty model is now broken forever. Cut fuel tax and you stimulate economic activity, create jobs, increase consumer spending and lower inflation,” he added.
Follow @Motor_Transport on Twitter for live Autumn Statement updates on the day (25 November).
Key report claims
- Lower oil and fuel prices during 2005 have provided an annual boost to Gross Domestic Product of between 0.5% to 0.6%; thanks to a resulting increase in household spending power that has driven consumption.
- They have supported an additonal £11.6bn in Gross Value Added: roughly equivalent to the annual output of Sheffield. Had the fuel duty escalator still been in place this would have been only £6.9bn.
- Created around 121,000 jobs: 18% more than if the fuel duty escalator had been in place.
- Had a postive impact on tax reciepts, with net revenue up between 0.2% to 0.3%. Despite lower VAT reciepts on fuel, the exchequer is estimated to collect and additional £1.3bn in reciepts over the course of the year.
