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Chancellor cancels fuel duty rise in budget

Chancellor George Osborne received a cheer in the Commons during his budget speech on Wednesday 20 March for taking a penny off a pint of beer but by far the most significant liquid tax adjustment took place elsewhere. The rise in fuel duty that had been scheduled to be introduced in September of this year has been cancelled.

Chancellor George Osborne received a cheer in the Commons during his budget speech on Wednesday 20 March for taking a penny off a pint of beer but by far the most significant liquid tax adjustment took place elsewhere. The rise in fuel duty that had been scheduled to be introduced in September of this year has been cancelled. Mr Osborne claimed that the cancellation meant that petrol was now 13p cheaper per litre than it would have been had the government not frozen duty for the past two years. The Chancellor added: ""For a Vauxhall Astra or a Ford Focus, that's £7 less every time you fill up."
 
The last time fuel duty was increased was January 2011, when it went up by 0.76p per litre. That increase was soon reversed though by a 1p cut in March of the same year. All planned increases have been postponed indefinitely since that date. The Chancellor continued: "We've now frozen fuel duty for two years. This has not been easy. The government has foregone £6bn in revenues to date." Mr Osborne went on to announce that he would also extend the 100% first year road tax allowance for buyers of the lowest emission vehicles while introducing a new scheme of company car tax bands for ultra-low emissions vehicles. He confirmed: "From April 2015, two new company car tax bands will be introduced at 0-50g/km CO2 and 51-75g/km CO2."
 
Looking at the longer term, fuel duty has increased from 45.82p per litre in 2001 to 57.95p per litre now. That means that some 42% of what the driver pays at the pump goes straight to the tax man. Once you take VAT into consideration, the government rakes off a total of 59% of the forecourt price. According to the Office for National Statistics, this makes the cost of fuel one of the main elements of transport costs.
 
Fuel duty also represents a major source of revenue for the government. In the financial year of 2011-2012, for example, the Treasury took in nearly £ 26.8 billion from fuel duty. This represents close to a three-fold increase when compared to the 1990-91 figures of £9.63 billion. Interestingly though, the £ 26.8 billion figure from 2011-2012 was a drop on the figure for the previous year of £27.26. This was due to the fact that 527 million fewer litres of fuel were sold as the tough economy resulted in drivers choosing to drive less where possible.

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