Fuel duty rise postponed

Ministers are reportedly considering scrapping the freeze on fuel duty (Reuters)

Chancellor Alistair Darling offered some respite to motorists today by postponing April's scheduled 2p-a-litre rise in fuel duty until October.

But he added that fuel duty would increase by 0.5p a litre in real terms from 2010.

Mr Darling said: "For environmental reasons we will increase fuel duty by half a pence per litre in real terms from 2010.

"Fuel duty is due to rise again in April but, because I want to support the economy now and help business and families, I will postpone that increase until October."

AA president Edmund King said: "This temporary relief should quell any panic at the pumps. The Chancellor has listened to us and made a sensible decision.

"The proposed increase would have taken fuel prices to new record levels. Two pence might not sound like much but when it is added to the 20p-a-litre increase in pump prices in the last year it could have been the last straw for many motorists and hauliers.

"If fuel prices remain at record levels in the autumn the increase should be scrapped."

David Frost, director-general of the British Chambers of Commerce, said: "With the price of petrol at the pump rocketing, the Chancellor was right not to introduce the proposed 2p rise in fuel duty.

"However, as the Chancellor reduces his own economic growth forecasts, he should have said that he is scrapping the 2p rise rather than merely deferring it.

"Businesses and motorists are being squeezed by higher fuel costs and the Government is getting an unexpected windfall due to higher duty receipts. There is no justification for a 2p rise in October."

The Freight Transport Association (FTA) welcomed the 2p postponement, saying it would save the industry about £140m.

But it added that any increase should have been put off for at least a year while the market remained so turbulent.

Motorists will also face an April 2009 fuel duty rise of 1.84p a litre - an increase previously announced.

Mr Darling also announced further transport measures today, saying that if Britain was to remain competitive over the next 20 to 30 years, the Government had to take more radical steps to reduce congestion on our roads.

He announced he was:

* Setting aside new funding to develop the technology which could underpin national road pricing, inviting tenders to test this with the results expected next year;

* Reforming capital allowances for business cars to increase the incentive to move to lower carbon-emitting cars;

* Proposing, from April 2009, a major reform to Vehicle Excise Duty (car tax) to encourage manufacturers to produce cleaner cars and, by introducing new bands, there will be an incentive to encourage drivers to choose the least-polluting car;

* Under this new regime, the most-polluting vehicles will face a VED rate of £425, while those emitting 150 grams or less of CO2 per kilometre will pay less;

* Introducing from April 2010 for new cars a new first-year VED rate based on carbon dioxide emissions of the car;

* Cars which emit less than the proposed 130 grams per kilometre European standard of carbon dioxide emissions will pay no car tax at all in the first year, but a higher first-year rate of £950 will be introduced for the most-polluting cars.

Mr Darling said: "It is right that if people choose to buy a more-polluting car that they should pay more in the first year to reflect the environmental cost.

"The changes will provide a real incentive to manufacturers and motorists."

The Treasury reckons that as a result of the reforms, the majority of motorists will be better or no worse off in 2009.