According to analysis, keeping the fuel duty cut in the budget is a policy that favors the richest individuals in society and will result in them saving £60 annually. In contrast, those with lower incomes will only save £22. This policy is considered regressive.
Jeremy Hunt is anticipated to declare a prolongation of the reduction of 5 pence in fuel tax introduced in 2022, a suggestion that has earned him praise from the conservative media.
The Social Market Foundation (SMF) thinktank has reported that the anticipated £5bn annual cost of the freeze is not a wise use of funds. Furthermore, it primarily benefits the wealthier members of society who own a greater number of vehicles, particularly less fuel-efficient SUVs.
According to analysis from the SMF, the Treasury has incurred a total cost of £100bn since 2011 due to the fuel duty freeze and the 5p reduction in fuel duty, both of which were initially implemented as temporary measures in 2011.
The expected outcome of the two tax reductions on fuel is a decrease of £27 billion in the Treasury’s budget over a span of five years. The Conservative party criticized the Labour party’s decision to abandon their £28 billion commitment to green investments during this same time frame as excessively costly.
Some critics have claimed that the reduction in fuel taxes primarily benefits the wealthy and has minimal impact on the economy, especially as the quality of public transportation declines.
The SMF discovered that the lowest fifth of income earners would only receive 10% of the total savings, while the top fifth would gain 24%.
Chris Todd, the leader of the advocacy organization Transport Action Network, stated: “We must ramp up our funding for public transportation in order to promote equality and provide individuals with enhanced opportunities for employment, healthcare, and leisure. Unfortunately, we are witnessing a trend of reduced services being justified by cuts in fuel taxes. This primarily benefits the wealthy and does little to support our economy. It is the most vulnerable individuals who bear the brunt of these diminished services and the subsequent increase in pollution.”
According to Sarah McMonagle, the director of external affairs for Cycling UK, a large number of people rely heavily on their cars because the government has not made enough long-term investments in public transportation, cycling, and walking. This lack of investment results in limited options for affordable, safe, and dependable alternatives to driving. McMonagle believes that what the public truly needs are comprehensive transport policies and sustained funding, rather than mere promises from politicians to support drivers.
The SMF has proposed fairer and environmentally friendly approaches to reducing the expenses associated with driving. This includes prioritizing investment in public transportation, which can offer more affordable options for those looking to switch from driving and alleviate traffic for those who choose to continue driving.
According to the study, when public transportation speed is 10% faster compared to driving, the average household can save £435 per year on their transportation expenses.
According to the SMF, individuals who drive electric cars spend approximately half of what those with petrol or diesel cars spend on fuel. The study also shows that if the cost of purchasing an electric vehicle were equivalent to that of a traditional car, households could save an average of £900 per year. The thinktank proposes that instead of reducing fuel taxes, the government could allocate this money towards constructing charging stations and providing financial assistance for low-income families to access electric vehicles.
In regards to fuel duty, Gideon Salutin, a senior researcher at the SMF, explains that the common belief that freezing fuel prices benefits low-income households and working-class commuters is not entirely accurate. It is often these households that drive less, own fewer vehicles, and utilize more efficient modes of transportation.
“The government is losing out on billions of pounds per year and depriving low-income households of more affordable alternatives such as public transportation and electric vehicles by regulating fuel taxes. These options have the potential to alleviate poverty for millions, but instead, billions are being wasted on unfair reductions.”
Source: theguardian.com
