PRA urges Chancellor to cut road fuel tax by 2ppl

The PRA has written to Sajid Javid MP, the Chancellor of the Exchequer, a case for cutting road fuel duty by 2 pence per litre in the first Budget of the new Government.

It outlines how under the Laffer Curve – which shows that cutting taxes can increase revenues – a reduction in fuel duty would be a key stimulant to the post-Brexit economy. The Treasury’s dynamic modelling in 2014 concluded that the 1ppl fuel duty cut carried out by George Osborne would boost UK economic growth by up to 0.5 per cent, with over half the cost of the cut being recouped through increased revenues.

“The PRA is calling for a cut in road fuel duty, that will help working people and businesses across the country,” said Brian Madderson, chairman of the Petrol Retailers Association (PRA) in his submission to the 11 March Budget.

The PRA also believes that the reduced duty will be of particular benefit to those in the Midlands and the North, where public transport links in these areas are usually inadequate. With cut rail links and mixed bus services, a lower tax on road fuels will be of huge benefit to those who are compelled to use their cars.

The PRA estimates that the cut would cost around £940 million, although this is without taking in account the Treasury’s own modelling of the boost to the economy. Losses will also be offset by the Road Transport Fuel Obligation (RTFO), which is estimated to generate £840m in 2020, alongside other revenue raising exercises.

Madderson continued, “A fuel duty cut would help to stimulate business and investment, and we welcome the fact that it is also being recommended by the main haulage trade associations such as the Road Haulage Association and the Freight Transport Association.”