Pre-Budget report: fuel duty frozen

05 December 2005

  • No increase in fuel duty at least until '06 Budget
  • Taxes on oil companies could put up petrol prices
  • Tax breaks for biofuels announced

car and money

Fuel duty has been frozen for the remainder of this financial year, but motorists could still end up paying more the pump.

Chancellor Gordon Brown said during his pre-Budget report that the freeze was down to continued volatility in the oil market. The fuel duty freeze will continue until next spring's budget at the earliest.

The RAC Foundation welcomed the freeze in duty, but was concerned that the tax increases announced by Brown for oil companies could still put extra pennies on a litre of fuel. RAC executive director Edmund King called on fuel companies not to pass on their tax increases to motorists.

Brown also introduced tax breaks for the production of biofuels in a bid to stimulate its use and help to bring down carbon dioxide output.

Currently biofuels, which are derived from crops and so introduce no extra carbon dioxide into the environment, is only available at a few sites in Essex and the West Country and accounts for just 0.25% of all fuel.

Ford already offers biofuel models, while Saab will introduce them to the UK next year. Both manufacturers want biofuel to be more readily available, but their models can run on conventional fuel when it is not available.

Although there has been much speculation that owners of 4x4s are to be stung with higher road duty charges, there was no increase in the report. Instead Brown said: 'The Government will continue to consider the case for improving VED (road tax) incentives for fuel-efficient vehicles.'

Brown said he would also consult industry on how to encourage the uptake of low-sulphur petrol. Direct-injection petrol engines, such as the Volkswagen Group's FSI range, rely on the fuel to perform at their cleanest.

No increases in company car tax were announced either, while Brown said he would consider tax breaks for cars using the cleanest Euro V engines. Euro IV engines only become compulsory in all new cars from January next year, so Euro V powerplants are some way off.

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