Cutting fuel duty wont help
Commentators believe cuts would be ill targeted and environmentally destructive
Britain’s next Prime Minister should think twice before slashing fuel duty.
This is the view of Nawaz Haq, Executive Director at SulNOx Group Plc, and others. The firm specialises in the decarbonisation of fuels including petrol and diesel.
The reasoning is that it does little to help the poorest in society and would be detrimental to the environment.
What’s the target?
As the Conservative leadership contest continues, a number of candidates pledged fuel duty cuts. As they vie to become the next Prime Minister, the pledges are seen as headline grabbing populist statements. However, Haq says they are unsustainable and poorly targeted towards those most in need.
For example, last week Penny Mordaunt, vowed to slash fuel duty by 50%.
A leading official at the International Monetary Fund (IMF) said tax cuts would be a mistake and could fuel inflation.
In a recent report by think-tank the Resolution Foundation, Dr Jonathan Marshall there is “clear rationale” for such proposals. The cost of living crisis sees higher transport costs squeezing budgets.
However, “cheaper fuel would see more benefits flow to those who are in less need of help” .
Mr Haq says that “in the current climate, of course reductions in taxes would be welcomed”.
However, “they have to be effectively targeted and be sustainable”.
Another recent report by the New Economics Foundation highlighted the failures of such policies. The combination of cutting fuel duty by 5p and changes to National Insurance contributions will result in just £90 a year being put back in the pockets of the poorest tenth of households. This compares to £580 for the richest tenth.
The world matters
“And there is also another issue here that we can’t ignore. We are in the midst of a climate crisis as well as a cost of living crisis,” states Mr Haq. “If we refuse to tackle the climate crisis, it is again the poorest in our society who will suffer. It is interesting that, while the country swelters and a national emergency is declared due to the effects of climate change, the subject has barely entered the leadership contest.
“The UK government, in its policy statement on the end of the red diesel rebate, said that higher fuel prices encourage the take up of greener and cleaner vehicles and push users to improve efficiency or to use less fuel. By the government’s own admission, a fuel duty cut cannot be good for the environment and goes against the fabric of the government’s Net Zero Strategy, which is currently in the midst of being legally challenged.
“I know it is not a popular thing to say, but we cannot look at short-term gain that will cause real long-term suffering. Any suggestions of tax cuts have to be understood and targeted properly and be sustainable both in terms of the economy, and the climate.”