Philip Hammond hints he will scrap freeze on fuel duty in this autumn's Budget

Philip Hammond hints he will scrap freeze on fuel duty in this autumn's Budget

Cost of freeze must be 'looked at again', Chancellor tells MPs - as he wrestles with how to fund Theresa May’s pledge of £20bn for the NHS

Rob Merrick
Deputy Political Editor
@Rob_Merrick
Tuesday 11 September 2018 16:06
comments

Philip Hammond has hinted he will scrap the eight-year freeze on fuel duty in this autumn’s Budget, telling MPs the impact of the policy must be “looked at again”.

The Chancellor also pointed out that maintaining the freeze would cost the Treasury £38bn over the next three years – “twice as much as we spend on all NHS nurses and doctors each year”.

Asked to agree that it brings in almost as much tax as is lost, Mr Hammond instead warned: “That analysis would have to be looked at again in the context of the economy today.”

The signal comes as the Chancellor wrestles with how to fund Theresa May’s promise to pump an extra £20bn into the NHS by 2023, which she has acknowledged will require some tax hikes.

However, it risks a furious backlash among Tory MPs for whom the fuel duty freeze – introduced by George Osborne back in 2010 – is an iconic symbol of “blue-collar Conservatism”.

Those MPs could even defeat any plan to raise fuel duty – as they did when Mr Hammond sought to impose tax rises on the self-employed.

During Treasury questions in the Commons, former Conservative minister Robert Halfon – who has championed cheaper fuel – asked him to agree it “benefits the economy”.

Mr Hammond said the fuel duty freeze had “saved the average car driver £850 and the average van driver over £2,100”.

But he added: “It is important that we remember the other side of this coin, the fuel duty freezes since 2011 have meant the Exchequer has foregone around £46bn in revenues through to 2018-19 - and a further £38bn will be foregone over the budget forecast period as a result of these previously announced freezes.

“For context, this is about twice as much as we spend on all NHS nurses and doctors each year.”

Mr Halfon told The Independent there were “plenty” of Conservative MPs who would vote with him to try to block any increase in fuel duty.

“The parliamentary arithmetic would make it incredibly difficult to in traduce such a huge tax rise hitting millions of working people,” he said.

“It would also be a tax rise for businesses when they need financial stability in terms of leaving the EU, while lower fuel duty gives an impetus to economic growth which offsets the loss of tax revenue.”

Fuel duty has been kept at a rate of 57.95p per litre, for both petrol and diesel, since 2011, as successive Budgets have ripped up planned increases.

An inflation-linked rise would bring in around £800m extra for Treasury coffers next year – and billions more over subsequent years.

Mr Hammond needs to find the extra cash for the NHS without having to resort to ripping up the Tory manifesto pledge to eliminate the deficit by the mid-2020s.

Ms May said last month that tax rises would be needed to pay for the funding boost but promised this would be done in a “fair and balanced” way.

Some Tory figures believe that lifting the freeze on fuel would incur less public anger than other options, such as putting up the basic rate of income tax for the first time since the 1970s.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

View comments