Package of tax cuts to buy off protesters

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The government unveiled a £2.25bn package aimed at heading off a fresh fuel blockade, promising cuts in duty for both motorists and hauliers.

The government unveiled a £2.25bn package aimed at heading off a fresh fuel blockade, promising cuts in duty for both motorists and hauliers.

Gordon Brown, the Chancellor, estimated that the proposed changes would be the equivalent of a 4p-a-litre petrol price cut for private motorists and 8p off diesel for the haulage industry.

Mr Brown said he would consult on a freeze in fuel duty and a 3p drop in "green" ultra low sulphur petrol (ULSP), which he believed would make up the entire market for unleaded petrol by the end of next year. This would mean " a better deal for drivers and cleaner air across Britain," he said.

For transport companies, he calculated that a similar cut on diesel tax would deliver a £1bn saving for the industry.

Mr Brown insisted he was not making wholesale concessions to placate fuel protesters, but he told MPs: "I recognise and I understand the very genuine concerns of motorists and hauliers." Fuel protesters have given the Government until Monday to respond to their demands.

Under the Chancellor's proposals, fuel duty will be frozen until April 2002. If oil prices remain high, the freeze would be extended for a further year.

Discounts on vehicle excise duty for private motorists would also be extended. At the moment owners of cars with an engine size of 1,100cc and under receive £55 off the £155 road fund licence. Next year that will include cars of up to 1,500cc - about 8.5 million vehicles in all, about one in three. Owners of cars such as the Ford Focus and Escort, VW Golf, Vauxhall Astra and Rover 214 will benefit.

There would also be cuts in vehicle excise duty for lorries, worth between £1,000 and £4,000 per truck. The 100 separate rates of duty for trucks are to be replaced by seven rate bands. The Chancellor said he intended to create a £100m investment fund to help hauliersscrap polluting lorries and to help train and retrain employees. He also announced plans for a "Brit Disc" for foreign lorries operating in the UK, which could cost an estimated £1,500 per truck.

In recognition of the farming industry's involvement in September's fuel blockade, there would be a freeze on duty on red diesel used by farmers. Road tax on tractors and other agricultural vehicles would be abolished

Lord Macdonald of Tradeston, the Transport minister, said the Government had listened to the transport and agricultural industries and reacted responsibly. "They realised that demands for a 26p-a-litre cut in duty were not responsible. They began to see a more rounded approach was needed," he said.

Bernard Jenkin, the shadow Transport minister, described the concessions as "a substantial U-turn", arguing that the Chancellor had suffered a humiliation. "What sort of country do we live in? You take to the streets and you get concessions," Mr Jenkin said.

However, he said Mr Brown had not shown any true understanding of the protesters' arguments. "We would have cut 3p off tax on petrol and diesel now as a step towards lower taxation. The Chancellor still plans to increase tax in the longer term. This is a short-term pre-election package to buy off the protesters."

The Chancellor made clear his view that high taxation could be of benefit. He said the fuel duty escalator - introduced by a Conservative government and abolished in the last Budget - had helped to cut public borrowing by £30bn and had meant lower interest rates. It had also helped to fund investment in transport, health and schools. Carbon dioxide pollution would drop by between 1 and 2.5 million tonnes by 2010 partly as a result of the year-on-year rise in petrol tax, he said.

Roger King, chief executive of the Road Haulage Association, said the package was a "step forward", but transport companies needed to examine the detail and the campaign for a better deal for hauliers would continue. The cuts in fuel duty would not come into effect until March and the projected rise in the cost of crude oil would absorb them, he said.

David Green, the director general of the more moderate Freight Transport Association, said the proposals went a long way to meeting the industry's needs and urged the protesters to call off any protest.

John Dawson, policy director at the Automobile Association, said the Government was returning much of the £3bn in windfall tax receipts from high oil prices. He said the package would give early relief to hard-pressed motorists, particularly those on low incomes.