Rishi Sunak Announces 5p Fuel Duty Cut In Spring Statement To Ease Cost Of Living Crisis
The Chancellor Rishi Sunak delivered his Spring Statement to the Commons amid the backdrop of a rising cost of living crisis (Alamy)
6 min read
The Chancellor Rishi Sunak has announced a cut of five pence a litre in fuel duty to help tackle the cost of living crisis.
Delivering his Spring Statement to Parliament, he said it will come into force from this evening and will last for a full year.
He told MPs: “First, I’m going to help motorists. Today I can announce that for only the second time in 20 years, fuel duty will be cut. Not by 1, not even by 2, but by 5 pence per litre.
“The biggest cut to all fuel duty rates – ever. And while some have called for the cut to last until August, I have decided it will be in place until March next year – a full 12 months.
“Together with the freeze, it’s a tax cut this year for hard-working families and businesses worth over £5bn. And it will take effect from 6pm tonight.”
The Treasury said this will mean savings of £100 for the average car driver, £200 for the average van driver, and £1,500 for the average haulier.
It was one of three announcements Sunak made as he said the UK government wanted people to know they will "stand by them” as the cost of living crisis deepens, exacerbated by the Russian invasion of Ukraine.
The Chancellor revealed VAT will be reduced from 5% to zero on materials such as solar panels, heat pumps and insulation in a bid to help homeowners install more energy saving materials.
"We'll also reverse the EU's decision to take wind and water turbines out of scope - and zero rate them as well,” he said.
“And we'll abolish all the red tape imposed by the EU. A family having a solar panel installed will see tax savings worth over £1,000. And savings on their energy bill of over £300 per year."
Sunak also said he is doubling the Household Support Fund to £1 billion, with local authorities best placed to help those in need in their areas, adding they will receive this funding from April.
But it was criticised by the consumer campaigners Martin Lewis, who tweeted: “If that's all he's doing on energy - it is limited and won't impact the majority of households who will see a likely £1,300 average increase in year-on-year bills by October.”
Elsewhere he also said the threshold for paying National Insurance will increase by £3,000 from July, amid criticism of the 1.25% increase coming in next month to fund the Health and Social Care Levy.
The basic rate of income tax will also be cut by 1p in the pound in 2024, which the Treasury says is worth £5billion for workers, savers and pensioners - and will be the first reduction in the basic rate in 16 years.
The Chancellor also set out a series of measures to help businesses boost investment, innovation, and growth – including a £1,000 increase to Employment Allowance to benefit around half a million smaller firms.
He had been under increasing pressure to go further in helping households through the cost-of-living crisis after new figures released this morning showed inflation rising to a 30-year high.
The CPI rate has hit 6.2% in the 12 months to February thanks to increased energy costs along with food and goods prices soaring, according to the Office for National Statistics.
Sunak said it also predicted to carry on rising, citing the Office for Budget Responsibility (OBR), who now estimate inflation will average 7.4% this year.
Because of this and other factors such as supply chain pressure, the OBR have downgraded growth forecasts from 6% this year back in October to just 3.8% for 2022.
They warned "there is unusually high uncertainty around the outlook”, while Sunak said it is “too early to know the full impact of the Ukraine war on the UK economy”.
He told MPs: "The OBR then expect the economy to grow by 1.8% in 2023, and 2.1%, 1.8% and 1.7% in the following three years."
In it's report on the Spring Statement the OBR said: "With inflation outpacing growth in nominal earnings and net taxes due to rise in April, real livings standards are set to fall by 2.2% in 2022-23 – their largest financial year fall on record – and not recover their pre-pandemic level until 2024-25."
Earlier Sunak pledged to "stand by" families to help them weather the crisis, but was branded the "high-tax Chancellor” by Labour, who were urging him to scrap entirely the hike to National Insurance.
Meanwhile fuel prices have also hit new record highs, with data firm Experian Catalist publishing analysis suggesting the average cost of a litre of petrol at UK forecourts on Tuesday was £1.67, with diesel at £1.79.
The Chancellor also linked strengthening the UK economy to opposing Russian President Vladimir Putin's invasion of Ukraine, telling the Commons: "So when I talk about security, yes, I mean responding to the war in Ukraine.
"But I also mean the security of a faster-growing economy, the security of more resilient public finances, and security for working families as we help with the cost of living."
The invasion of Ukraine has exacerbated existing rising wholesale gas prices, fuelled by a post-pandemic rise in demand.
He also said underlying debt is expected to fall steadily from 83.5% of GDP in 2022/23 to 79.8% in 2026/27.
Borrowing as a percentage of GDP is at 5.4% this year, but is forecast to fall to 3.9% next year, then 1.9%, 1.3%, 1.2% and 1.1% in the following years.
"The OBR has not accounted for the full impacts of the war in Ukraine and we should be prepared for the economy and public finances to worsen - potentially significantly,” Sunak warned.
“And the cost of borrowing is continuing to rise. In the next financial year, we're forecast to spend £83 billion on debt interest - the highest on record.”
He said that is why he will continue to "weigh carefully" calls for additional public spending.
Sunak had perviously announced a £200 loan for gas and electricity payments from this October, while certain households will get a £150 council tax rebate in April.
But he had been criticised for not going far enough, prompting him to add further measures to the Spring Statement, which had originally meant to be only a technical update on the nation’s finances.
In response the shadow Chancellor Rachel Reeves said: “Today was the day the Chancellor could have put a windfall tax on oil and gas producers to provide real help to families. But he didn’t.
“Today was the day for the Chancellor to set out a plan to support businesses and create good jobs. But he didn’t.
“Today was the day he could have properly scrapped his national insurance hike. But he didn’t.”
The Labour frontbencher told the Commons “for all his words, it is clear the Chancellor doesn’t get the scale of the challenge”, saying his choices “are making the cost of living crisis worse - not better”.
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