By Ben Sillitoe
Chancellor of the Exchequer George Osborne announced a 1p cut in fuel duty during his Budget speech to Parliament today.
Having noted that the price of petrol was having “a huge burden on families”, the measure represented the standout statement of his hour-long address and may provide a much needed boost to consumer confidence when introduced at 18:00 GMT today.
The Chancellor also said that the government is introducing a “Fair Fuel Stabiliser” funded through increasing the charge on North Sea oil and gas production by 12 per cent.
It will keep fuel duty down when petrol prices are high by charging oil companies more, effectively taxing them in order to ease the cost of living for families living in Britain.
Edmund King, President of motoring organisation The AA, said that “a summer of discontent” has been averted because of Osborne’s announcement, adding: “Any increase in duty would have bled many drivers on low incomes dry.
“The Fair Fuel Stabiliser is an idea first mooted by the AA and we are pleased it is being considered - this should bring more certainty to the market.
“However, with jittery stock markets and tensions in North Africa pushing the oil price back into the $115-$120-a-barrel price range, pressure on pump prices and inflation could grow again.”
The success of the retail industry in the coming months will largely depend on the strength of consumer sentiment, and there were a number of things said today that have the potential to increase confidence across the UK.
Osborne revealed plans to put £250 million into helping first-time buyers get a foot on the housing ladder through the launch of a new shared-equity scheme, as well revealing that he will be increasing the personal tax allowance from £7,475 to £8,000.
It must be said that the Chancellor focused more on stimulating business growth today than encouraging a short-term stimulation of spending, but Consulting Director at Verdict Research Neil Saunders agreed it was the right angle to take.
Commenting on some of the consumer-focused measures, he said: “The cut in fuel duty and the introduction of a fuel stabiliser is the most welcome news.
“However, the measure is preventative, inasmuch as it will stop retail growth from slipping further, rather than one which will stimulate significant new growth.
“The increase in the personal allowance will be of some value in giving consumers an additional chunk of money to spend, but will not completely offset the erosion in disposable income because of the inflation and wages gap.”
In reaction to Osborne’s speech, leader of the opposition Ed Miliband said the pace of cuts made by the coalition government over the last year is a major reason why consumer confidence has fallen to record levels in recent months.
He criticised the coalition for the slowing growth levels forecast today, and contradicted the Chancellor’s claim that the Budget was about helping families. He said that people in the UK are actually seeing their “living standards squeezed”.
Osborne also announced plans for direct tax to be indexed by CPI rather than RPI from April 2012, prompting the Labour Party leader to say that a number of measures detailed today represent “a classic Tory con” whereby some tax cuts will actually cost people more in the long run.
Miliband’s silence on the Chancellor’s decision to freeze petrol tax, however, highlighted the strength of the 2011 Budget’s headline announcement. It is a plan that is sure to be welcomed by consumers across the UK.