Transport chiefs warn over fuel duty rise

Drivers face more pain at the pumps tomorrow when a planned Government fuel duty rise puts another 1p on the cost of a litre of petrol and diesel.

The Freight Transport Association (FTA) warned today that this "smash-and-grab approach" by Whitehall could put many struggling transport companies on the ropes.

Fears that some firms could go out of business were also expressed by Robert Matthams, founder of Shiply.com, which represents more than 17,500 UK transport firms.

FTA chief economist Simon Chapman said: "Diesel is an unavoidable expense and accounts for a third of the costs of running a truck. Successive above-inflation tax hikes since 2009 mean the freight industry is shouldering a disproportionate burden in narrowing the public sector deficit.

"With another rise due in January and above-inflation rises set for the next three years, many businesses hit hard by the recent recession will feel like they are on borrowed time."

He went on: "The price of oil is the highest it's been for three months and is set to rise further as we come into the autumn peak period of oil demand. With economic recovery still so fragile, now is not the time to compound the problem with artificial price hikes.

"With the duty hike affecting petrol too, the Treasury will net an extra £500 million a year in total from all road users.

"For every £1 of tax raised from road users, just 22p is currently spent on the road network.

"If the Government persists with the strategy of above-inflation rises in fuel duty, it should 'ring fence' the element that exceeds inflation and invest it in those road and rail networks in most urgent need of improvement."

The FTA said the 1p rise would add another £125 million a year to the transport industry's bills.

Mr Matthams said: "This is a highly-competitive sector to operate in and one which has been particularly hard hit by the recession. Haulage firms were among the first to feel the pinch two years ago and many of them have found it hard to keep their heads above water, even as things have begun to improve.

"Now there's the 1p per litre duty rise to hit them once again. The rise seems marginal, but that cost has to be met somewhere. It means higher overheads which could force some of the smaller firms - already teetering on the edge - to reduce staff, cut wages or even close down all together.

"In the last 18 months, the price of fuel has risen by almost 30p. So for a large lorry, the price in that period has increased by £300 a tank. That's a huge additional overhead."

AA president Edmund King said: "This fuel duty increase highlights a series of contradictions that make it hard for drivers to accept.

"Petrol and diesel prices today are at least 10p a litre higher than this time last year, already generating an extra 1p a litre VAT windfall for the Treasury. Hence we question why this fuel duty rise is needed."

He went on: "Fuel consumption has fallen significantly due to the effect of recession and tough household and business finances.

"Pushing the petrol price almost to the level of the 2008 record high simply continues the folly of creating more pain for less gain. This increase could backfire as it will hinder economic growth.

"The deputy governor of the Bank of England has suggested people should dig into their savings to boost the economy, which is difficult as 66% of drivers are already cutting back on expenditure or journeys due to the high cost of fuel.

"This year's 3.24p-a-litre increase in duty with VAT will have siphoned a further £82.56 out of the budget of a two-car family - double the £41 average increase in council tax."