Spring Budget 2022: what does it mean for motorists?

Filling up your car with fuel will cost 5p per litre less from 6pm this evening, thanks to a cut in fuel duty announced by Chancellor Rishi Sunak in the Spring Budget...

Rishi Sunak briefcase

Fuel duty will be cut by 5p per litre from 6pm this evening until March 2023, Chancellor Rishi Sunak has announced, in order to help ease the rising cost of fuel for drivers.

Speaking as part of the Spring Budget, the Chancellor described the change as "the biggest cut to all fuel duty rates, ever".

Motoring organisation the RAC says the 5p cut to fuel duty will make filling up the average family car £3.30 cheaper than it does currently. On average, drivers are paying more than £7 extra to fill up the average 55-litre family car than they would have at the start of 2022.

Until now, fuel duty has made up 58p, or 35%, of every litre of petrol. Other costs included in the price of fuel are the retailer's margins, which is typically around 8%, VAT at 20%, and the wholesale cost of petrol itself, which makes up 33% of the total. For diesel, fuel duty makes up 32% of the price of a litre. The Duty has been due to rise in recent years, but has remained frozen since 2011. 

Across the year to come, the Government says the cut will save £100 on average for car drivers, £200 for van drivers and £1500 for lorry drivers, compared with the cost of filling up if fuel duty had risen. It's a saving, the Government says, worth £5 billion in total.

Today's announcement means the Government will miss out on an estimated £2.5bn of lost revenue from fuel duty. This is only the second time in 20 years that fuel duty has been cut – the last cut was in April 2008, at the height of the economic crisis.

Electric Highway charging stations with Audi e-tron Sportback

Earlier this month, the RAC called on the Chancellor to do more to help drivers, following record rises in fuel prices. The average price of a litre of petrol hit £1.67 per litre on the morning of 23 March, while the average price of diesel hit £1.79. The fuel duty cut means the price of a litre of petrol will fall to £1.62, while diesel will fall to £1.74 per litre.

Prices have been rising by 1p or more each day in recent weeks, while earlier in March, diesel had its largest daily increase since 2000. Ahead of the budget, 50 Conservative MPs echoed the call to cut fuel duty. Today's cut doesn't help the rising number of drivers of electric cars, which so far in 2022 have represented 17.7% of the market.

Mini petrol station

The price of petrol has been high throughout February and March as a result of the Russian invasion of Ukraine. The UK imports 6% of its crude oil from Russia, and prices here are affected by global costs rising.

Other factors which have seen prices rise in recent months are the mass return to office work following the coronavirus pandemic, and the boom in commuting. Oil producers around the world have struggled to keep up with demand.

However, there have been concerns raised that only wealthier households would benefit from a lower price of fuel. Indeed, the AA Foundation reports that more than a third of the poorest households in the UK don't own a car at all.

A 'proportionate' cut to the duty paid on other fuels, including the red diesel used commonly in agriculture, is also planned.

What has the reaction from the car industry been?

Campaigning group Fair Fuel UK welcomed the change, with founder Howard Cox saying: "It will give some respite to millions of motorists that have had and continue to have no choice but to drive." However, he also called for the cut to be made permanent.

The RAC warned that, even with the cut to fuel duty, prices would only be back "to where they were just over a week ago," and warned that there was "a very real risk [that] retailers could just absorb some or all of the duty cut themselves by not lowering their prices".

The Society of Motor Manufacturers and Traders welcomed the cut in fuel duty, but said the industry "also needs support, especially on energy, investment and skills. Time is of the essence as the industry is not yet in recovery but costs are increasing rapidly, undermining U.K. competitiveness. Government could have acted today to help automotive manufacturers alleviate soaring business energy costs and encourage investment."

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