George Osborne’s Fuel Cut

Created Date: 26/04/2011

When George Osborne originally revealed his planned annual budget, it unveiled an unexpected cut on fuel prices by... one penny. Although it is admittedly better than his original plan of hiking the price up by a further 5p, one could see it as sort of an insult regardless. On face value it seems like an absolute joke – how can one penny feasibly make any sort of significant difference to our fuel savings? In short, it doesn’t. In wake of the worldwide recession, oil companies have already had to inflate prices more than they’d like in order to continue meeting revenue targets. While all this is happening, George Osborne believes a one pence deduction is adequate?

His underlying explanation is something of a different perspective to the population, with his beliefs being that it will help ease people’s expenses. This is definitely not the case however, as the public have already expressed outrage at his budget centrepiece. A poll carried out by a National newspaper concluded that 80% of the public believed axing the one penny cut would do nothing to their pockets, ahead of 10% who disagreed and 10% who didn’t know. Adding insult to injury, the RAC recently confirmed that the soaring world oil prices have already knocked away the penny decrease and then some. They reported the average UK price of petrol is now 133.55p a litre, which is 0.02p higher than the average price on March 23 when the duty cut was announced.

For those who don’t understand why this happened, it was an obvious step that oil producers were going to make. The five pence rise was going directly to the exchequer, so George Osborne couldn’t cut the fuel price without finding an alternate method to generate the lost tax revenue. He introduced the "fair fuel stabiliser" as a solution - increasing the tax on gas and oil production from 20 per cent to 32 percent, as a way to generate the extra revenue needed. At which point the oil companies simply upped the buying price for firms, increasing the cost you pay when you go to your local pump. Thus all that was solved was the matter of the government tax hole, with motorists once again being left out in the cold.

For companies and motorists alike, this all amounts to a worrying problem where we are once again back to square one. If prices don’t improve many experts predict the possibility of a second recession, which considering that we are only just climbing our ways out of the first one would be catastrophic. This could become something of a reality as soon as next year, when George Osborne introduces the newer, revised annual budget. Many drivers are worryingly pondering the prospect of the meagre penny saving plan disappearing even further under the weight of more inflation to substitute government taxes. Unless things change drastically over the rest of the financial year, we can only expect this hard time for motorists to get even harder as time goes on.

More Motor Industry News