With oil prices continuing to soar, there can be little surprise at today’s announcement from the Chancellor, Alistair Darling, that the planned 2p per litre rise in fuel duty due in October will be delayed until April next year. Planned increases in the duty on road fuel gases, bio-fuel duty rates and rebated oils rates will also be postponed.

The Government had originally planned to increase fuel duty by 2p per litre in the last budget. However, following sharp increases in the price of oil, Darling postponed the rise until 1 October 2008. Today’s announcement delays the increase for a further six months and, according to the Treasury's own figures, will cost the exchequer around £600m.

The postponement is a direct response to pressure from motorists who are increasingly concerned about the increasing cost of fuel. In the words of Darling: "The global credit crunch and sharp rises in world oil prices have pushed up prices at the pump. Today's decision will help motorists and businesses get through what is a difficult time for everyone." The Treasury said it was responding to "sharp rises in world commodity prices, with the price of oil almost doubling over the past year to reach a real-terms record high of $146 [£73] a barrel recently".

As a result of the decision, fuel duty on petrol and diesel will remain at 50.35p per litre until at least April 2009. The Treasury said this was 17% lower in real terms than in 1999. Fuel taxes (duty and VAT) now account for only around 55% of the pump price; far less than the 75% level that sparked the fuel protests back in 2000. According to the AA, the cost of a litre of UK unleaded petrol now averages around 119.5p, with diesel averaging 133.0p. Figures show petrol prices have risen nearly one-quarter during the past year, and diesel 36%.

The president of the AA, Edmund King, said: "We are delighted the chancellor has seen common sense. The prospect of extra, government-inflicted pain was not something road users were looking forward to. Many motorists have endured months of misery and this is a welcome piece of good news for them." Soaring oil prices mean it has taken around five weeks for petrol and diesel prices at the forecourt to rise 2p a litre to current levels, the AA said.

With a projected loss in revenue, Darling will now be under increasing pressure to raise taxes elsewhere to protect the public finances. The combination of postponing the fuel duty increase and making up for the abolition of the 10p starting rate of tax will cost the Treasury more than £3.6bn.

Vincent Cable, the Liberal Democrat Treasury spokesman, accused Darling of responding to a "panic environment”. He told the BBC: "I do accept that the fuel price increases are causing a great deal of hardship." But it would be better to target measures to help people in particular need, like those living in rural areas, not all motorists, he said. "Presumably they are going to have to borrow the money to fund this. It gives the impression the government is just improvising."

Source: WhatGreenCar