Spring statement: Sunak confirms fuel duty cut to aid firms and households

Chancellor Rishi Sunak has used his spring Statement to implement a fuel-duty cut as part of efforts to help firms and households deal with a spike in inflation.

Sunak said that from 6pm this evening fuel duty would be reduced by 5p a litre on both petrol and diesel, and that the reduction would stay in place until March next year. 

The move will go some way to offset fuel prices which have rocketed to record levels in recent weeks, as Russia’s invasion of Ukraine added extra uncertainty to global energy markets and created new pressures for the construction sector.

Earlier this week Mace chief executive Mark Reynolds said price rises were occurring “pretty much in most places” and that a cut in fuel duty “could take 10% out of the cost of fuel quite easily without too much damage to the economy”.

HM Treasury said it expected the duty cut to save hauliers £1,500 a year on average, while van drivers were expected to be £200 better off than would otherwise have been the case. Car drivers will save £100 as part of the move, which the Treasury said would have an overall cost of £2.4bn.

Sunak said: “Cutting taxes means people have immediate help with the rising cost of living, businesses have better conditions to invest and grow tomorrow, and people keep more of what they earn for years to come.”

Elsewhere in his statement, the chancellor set out plans to temporarily remove VAT from energy-saving products like solar panels and wind turbines, and bring forward the introduction of “green reliefs for business rates” covering capital expenditure on machinery for onsite renewable-energy generation. Exemptions that had been due to come into force in 2023 will now go live next month.

However, Sunak stood firm on proposals to increase National Insurance contribution rates that are due to go up from next month to cover part of cost of the nation’s Covid response and then contribute funding for social-care reform.

See also>> Spring statement: Chancellor brings forward green business rate relief

Clive Docwra, managing director of the property and construction consultancy McBains, said the measures outlined by Sunak contained “little direct help for the construction sector” at a time when inflationary pressures are having a substantial impact and confidence is dipping.

“The 5% cut in fuel duty will be of some consolation to the industry, although we would have liked to have seen the NI increase paused, as this would have allowed firms to invest more to recover from the pandemic and increase staff wages to help cover inflationary pressures,” he said.

Docwra acknowledged that the removal of VAT from energy-saving products would support retrofitting work for the construction sector as well as deliver lower energy bills for consumers.

Redrow Group chief executive officer Matthew Pratt said Sunak’s tax-cutting measures would give people immediate help with day-to-day expenses and mean businesses have better conditions in which to invest and grow.

“We welcome the chancellor’s focus on boosting growth and supporting consumers with the rising cost of living,” he said.

“While Redrow has a resilient business model, a healthy housing market is in everyone’s interests and improving consumer spending power will help to keep people moving and ensure appropriate housing is available for all purchasers.”

Pratt added that as the UK moves towards net zero, the tax breaks on offer to help consumers install energy efficient technology to reduce their bills and energy usage in the long-term were a smart move.