Pump prices to rise despite fuel duty decision

Drivers were spared any new petrol pump price pain today in the Budget but motoring groups warned of further rises to come.

Although Chancellor George Osborne ruled out any fuel duty increases, motorists will still face earlier-announced rises of 1p a litre in October and 0.76p a litre in January 2011.

And with VAT due to rise to 20% in January, new-year pump prices will go up even further.

Motorists will also be hit by a rise in insurance premium tax.

AA president Edmund King said: "There is some relief that there is not going to be more punishment at the pumps but motorists will face a double whammy in the new year.

"We estimate that taking all the increases into account, motorists will, by January, be paying 4.63p a litre more for petrol and 4.68p a litre more for diesel than they are now.

"The insurance premium tax increase is also a blow. We already have a problem with uninsured vehicles."

The Government has already talked about a fuel stabiliser plan and today Mr Osborne said there would be an examination of the impact of oil price rises on pump prices.

Also on the transport front, Mr Osborne committed the new Government to a number of projects.

These included the upgrade of the Tyne and Wear Metro, the extension of the Manchester Metrolink, the redevelopment of Birmingham New Street train station and improvements to the rail lines to Sheffield and between Liverpool and Leeds.

Professor Stephen Glaister, director of the RAC Foundation said: "The Chancellor has pledged to keep investing in transport infrastructure and judge capital spending plans on the economic returns they deliver.

"This must be good news for the congested road network, and the 34 million drivers who use it, because highways schemes usually offer better rates of return than those for rail."

He went on: "Drivers know they must pay their fair share of taxes, but the emphasis is on fair and talk of a fuel stabiliser is to be welcomed.

"While there will be some relief that fuel duty has not been hiked even further, the existing planned rises, plus the increase in VAT, means the cost of an average tank of fuel will rise by about £3 early next year."