Osborne set to announce fuel tax increases

In a dramatic move intended to demonstrate his resolve and consistency, George Osborne is set to follow through on his summer consultation over introducing a fuel tax stabiliser, and will call for an increase in fuel duty.

As he said when launching the policy idea on 6th July:

[This is] A common sense plan to help families, bring stability to the public finances and help the environment by making the price of carbon less volatile.

The plan stated:

If a Fair Fuel Stabiliser had been introduced at the 2008 Budget, fuel would now be 5p per litre cheaper, shaving £3.50 off a tank of fuel for a Ford Mondeo.

But if, instead of rising, oil prices had fallen below the $84 forecast in the Budget, then fuel duty would have risen. [Source: official Conservative Party news release.]

With the price of oil now at $54, a full $30 below the policy’s trigger level for increasing fuel duty, George Osborne will attempt to see off his critics who see him as inconsistent and failing to come up with credible policies that will stick. He will be urging Gordon Brown to introduce an immediate increase in fuel duty.

Oh ok, he won’t be, will he? But I bet he’s hoping we’ve all forgotten that under those summer proposals, a Conservative government would now be increasing fuel duty 🙂

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This entry was posted in Leadership Election.


  • Let it not go unsaid that the SNP proposed these fuel duty increases long before George Osbourne stole their ingenious policy. The fiend.

  • Andrew Turvey 18th Nov '08 - 12:24am

    A fuel escalator is still a good idea in principle – one we should support, although of course denominated in GBP!

    The months of high fuel prices proved that cost can be very effective way of persuading people to reduce fuel comsumption, switch to smaller cars, car-sharing and public transport. Much more effective than years of inane advertising encouraging us to be green. If we are really an environmental party, we need to think seriously about starting to support fuel tax rises, once the price drops below a certain level (how about 90p/l?)

  • Clegg's Candid Friend 18th Nov '08 - 9:33am

    “If we are really an environmental party, we need to think seriously about starting to support fuel tax rises, once the price drops below a certain level (how about 90p/l?)”

    Hasn’t the party done more than “think about starting to” support fuel tax rises, without any condition on the price dropping?

    Isn’t it already party policy that fuel tax should rise in line with inflation, as part of the “Green Switch”?

  • Clegg's Candid Friend 18th Nov '08 - 12:46pm

    “Or are you suggesting that saving the planet should only be allowed as long as the price of petrol is dropping?”

    Where on earth do you see anything even vaguely resembling that in my post?

  • Mark: What is our current policy on fuel duty? Is it to increase it now?

  • Mark: Come on, answer the q: is it LD policy to raise tax on petrol now that petrol is coming down?

  • Mark?

  • Even with our carbon tax added to petrol prices would still be falling faster than with Osborne’s stabiliser.

    There is a real choice between the parties on this issue.

    We’re promoting fairness by saying that while we need to pay the true costs we’re also prepared to pass on any savings.

    The tories simply want to maintain the status quo.

    Labour on the other hand seem to be ready to do whatever Mr Dacre’s focus group tells them.

  • I am not sure Oranjepan has answered my question: would we put up petrol taxes now, on environmental grounds, and recycle the money (presumably into income tax cuts to get the basic rate down from 20p to 16p)? If so, how much would we raise petrol taxes by?

    We know, after all, that petrol is the only product whose tax exceeds the Stern value of carbon, so it is unclear to me from Oranjepan’s comment what we would do.

  • Hywel Morgan 20th Nov '08 - 12:26pm

    Tim – the answer seems to be:
    “We will keep rises in fuel duty in line with growth to ensure there is always an incentive to save fuel.” and also
    “We will raise Vehicle Excise Duty on the most polluting cars to £2000, and have lower bands to reward clean cars. We will also provide help for rural drivers where cars are essential due to the lack of public transport.”

    Mark is right that this is overall tax neutral but it will introduce a regressive element into an overall progressive package.

  • David Allen 20th Nov '08 - 1:57pm

    Hmm. So we’re going to raise fuel duty irrespective of the oil price. So when the oil price is higher, our total government fuel tax receipts will also be higher. Osborne, on the other hand, will react to a price spike by cutting the rate of fuel duty, thereby maintaining his total fuel tax receipts constant.

    Now it’s true that Osborne should now be raising his fuel duty rate back up again, and it’s true that he is being rather quiet about that. However, as Tory shenanigans and distortions go, this one seems a fairly minor offence.

    And it does seem to me that Osborne has a point. Won’t our policy just be needlessly difficult to sell, if we insist on clobbering people harder at precisely the same time as OPEC is clobbering them anyway? Wouldn’t we have more chance of establishing a robust fuel escalator policy (and holding the line in the face of roadblocking protesters) if we combined it with a stabilising scheme to smooth the peaks and troughs?

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