Welcome for Budget fuel price cut

The Chancellor provided some relief for beleaguered drivers today by not only postponing next month's planned fuel duty increase but also cutting the current duty by 1p a litre from 6pm today.

Mr Osborne also announced the introduction of a fuel stabiliser funded by increasing the supplementary charge on North Sea oil.

And he told the Commons that he would be providing an extra £100 million for local authorities to deal with potholes on the roads.

The Chancellor also announced that the vehicle excise duty car tax would increase with the rate of inflation but be frozen for heavy goods vehicles.

The April 2011 fuel duty rise, under the existing fuel duty escalator scheme, would have seen prices at the pumps rising by the rate of inflation plus 1p a litre - thus putting on almost 5p a litre to what are already record-high prices.

Mr Osborne said he was delaying the April rise until next year and the planned April 2012 rise would be put back to the following summer.

He also said that the fuel duty escalator would be cancelled for the rest of this Parliament.

But he warned the escalator would be reintroduced should the price of oil - currently around 115 dollars a barrel - fall below 75 dollars.

Prices at the pumps have reached record highs on an almost daily basis of late. Earlier this week the average petrol price was at an all-time high of 133.46p a litre, while diesel had gone through the 140p a litre mark for the first time and was averaging 140.01p.

The AA said the fuel duty freeze and the 1p cut from tonight would ease pain at the pumps and apply a "much needed tourniquet to drivers haemorrhaging money from record pump prices".

AA president Edmund King added: "We applaud the Chancellor's decision. Another price hike would have been the last straw for poorer drivers who spend a quarter of their household income on motoring.

"This action has probably stopped a 'summer of discontent' and is a common sense move. Any increase in duty would have bled many drivers on low incomes dry so this action offers short-term first aid.

"However, with jittery stock markets and tensions in North Africa pushing the oil price back into the 115 to 120 dollars-a-barrel price range, pressure on pump prices and inflation could grow again. After all, petrol prices were 5p a litre cheaper only as far back as the end of January. The early January increase in VAT and duty is already bringing in an extra 5p litre for The Treasury."

Mr King said the Government would have to consider further help targeting vulnerable groups, such as volunteer drivers, rural public transport and poorer rural drivers.

He added that the extra £100 million for potholes was welcome but "billions still need to be spent to bring all roads up to scratch".

RAC Foundation director Professor Stephen Glaister said: "The Chancellor has done the simple and correct thing in cutting fuel duty immediately and 34 million drivers will welcome this, as will hauliers.

"He is also right to link the level of duty to the underlying price of oil rather than use above inflation rises to indiscriminately raise money from motorists who effectively have no choice other than to run their cars."

Mr Osborne also announced that the approved mileage allowance payments for those using their own vehicles for work would rise from 40p to 45p per mile for the first 10,000 miles and 25p per mile thereafter.

Campaign for Better Transport chief executive Stephen Joseph said: "The Chancellor has chosen to give motorists a hand-out while leaving other transport users to face spiralling fares and service cuts.

"Rail users will see big fare rises year on year, while bus passengers are seeing services cut and fares increase as a result of a £133 million cut in Government support. Instead of cutting fuel duty, the Government should have done more to reduce our dependence on uncertain and declining oil supplies."

Friends of the Earth's transport campaigner, Richard Dyer, said: "Short-term measures to tackle rocketing fuel prices are merely a sticking plaster - it's our economy's long-term fossil fuel dependency that urgently needs treatment."

Brian Madderson, chairman of the petrol section of the Retail Motor Industry, welcomed the fuel duty freeze, adding: "The news of the immediate 1p duty cut has been very well received by forecourt operators and their customers."

Councillor Peter Box, chairman of the Local Government Association's economy and transport board, said the extra pothole money was "good news" but added that councils faced a £9.5 billion backlog in road repairs.

Shadow chancellor Ed Balls said: "The idea that drivers around the country should be grateful for a 1p cut in fuel duty when George Osborne's VAT rise is adding 3p to the price of petrol is laughable.

"When people fill up their cars this weekend, they should remember £1.35 of the cost is because of the Tory VAT rise.

"When we were in government, we regularly axed planned duty rises when the world oil price was rising and we would have done the same now. That's why the percentage tax take on petrol actually fell between 1997 and 2010."