Taxi drivers, farmers and carers fear 'hammer blow' fuel duty hike in budget
With the AA warning Rachel Reeves a rise in fuel duty could have a 'devastating impact on the economy', Yahoo News looks at what businesses are bracing for.
Taxi drivers are considering quitting as they brace themselves for Rachel Reeves's "painful" budget amid reports fuel duty could rise in Wednesday's budget.
The tax on motor fuels was frozen by the Tories between 2010 and 2022 and then cut by 5p to 52.95p per litre, where it remains.
The chancellor has previously been reported to be considering raising fuel duty by up to 7p per litre as part of the Treasury's plan to raise £40bn in public funds through tax rises and spending cuts. A conflicting report in the Times at the weekend cited Treasury officials saying Reeves was not considering such a "toxic" move.
It has left industry figures and campaigners warning the government that ending the 14-year freeze on rates would, in the words of the AA, have a "devastating impact on the economy and society's most vulnerable".
Cab drivers who faced a challenging period when fuel prices shot up following Russia's invasion of Ukraine in 2022 say any further hike could be a death knell, adding that they may not be able to pass costs onto customers at a time when many people have been struggling with the cost of living squeeze.
They're not the only businesses urging the government to reconsider the move, with the Road Haulage Association (RHA) previously warning the government that hiking the duty would be "bad for growth".
Here, Yahoo News takes a look at what different industries have said about the potential fuel duty hike.
Taxi drivers
Cab drivers are also preparing for a hit on their businesses, with an owner of a family-run taxi firm telling the BBC his business might not survive if fuel duty rises.
Lyn Davies, who runs Saron Taxis in Tycroes, near Ammanford, Carmarthenshire, told the broadcaster: "We probably might have to finish, or certainly cut down, cut cars out of the fleet."
He said his business spends around £1,000 a week on fuel and was "losing money" when the price of diesel peaked at 192p in the summer of 2022.
Davies added that the rates it can charge are set by the local council, meaning he can't pass all of his costs onto customers.
Speaking to Greatest Hits Radio, Sajid Akram, a Hackney Carriage taxi driver in Bradford, said: "This trade isn't working anymore, because of the fuel."
The cabbie said he wasn't sure if he could pass costs onto passengers as "they won't be able to afford it", adding: "There's a lot of competition and there's hardly any work anyway."
Motoring campaigner Quentin Willson told the Sun: "A 7p rise in duty - if oil prices stay stable - would bring petrol to 142p and diesel to 147p per litre costing drivers £4 more per fill up and an extra £175 per year.
"Taxi operators are already saying the hike could cost them up to £1,000 per year in extra fuel costs."
Farmers
In a letter to Reeves, Countryside Alliance chief executive Tim Bonner warned that "the cost of petrol is a critical issue facing rural communities", who already face a "rural premium" due to longer journeys by road and less public transportation.
"Pressure on rural communities’ finances remains, and so we would argue that now is not the time to let the cut lapse," he added.
He said cars are an "absolute lifeline" for people in rural communities, adding: “A fuel duty hike would be a hammer blow at a time when many rural people are already struggling.”
It follows a warning by fuel distributor Craggs Energy to farmers who buy their fuel in bulk to stock up now to avoid a "painful" uplift in costs after the chancellor unveils her budget, as reported by Farming UK.
However, for off-road vehicles such as tractors, farmers can use red diesel, which is charged a rebated rate. Its current average price is 73.03p per litre, according to energy website Boilerjuice, compared to regular diesel prices of 139.71p per litre, according to the government.
Lorry and coach drivers
Pleading with Reeves to reconsider, the Road Haulage Association said raising fuel duty "will be bad for growth and will ultimately damage the economy".
The RHA said its own analysis showed a 5p increase – let alone a 7p hike – "could slash £430 million from Britain’s national income each year for the next five years".
It pointed to a recent report by the Centre for Economics and Business Research, claiming diesel prices in the UK are "already higher than in any EU member state", adding that the cost of fuel accounts for 31-36% of running costs for many businesses in the road transport sector.
"We're clear that at a time when operating costs are higher and profit margins are lower - with record numbers of insolvencies, many businesses simply wouldn't be able to sustain such additional expense," the RHA adds.
During a recent session at the Welsh parliament, Michael Gough, the RHA's board director for Wales, said a rise in fuel duty would "only speed up business failures", Financial News reports.
Freight and logistics
In a similar vein, Logistics UK, a group representing road, rail, sea and air industries, as well as the buyers of freight services such as retailers and manufacturers, warns increasing fuel duty would "harm growth".
“Fuel is the largest single expense that logistics businesses have to bear,” Logistics UK policy director Kevin Green, said in August, as Reeves was undertaking a full review of public finances.
"With the sector already operating on extremely narrow margins – often only 2.5% - increasing fuel duty would heap the cost pressure on operators."
Green warned this could end up hampering the industry's efforts to move towards a decarbonised future, with no spare cash to implement the necessary steps.
“Increasing fuel tax would be a double whammy to millions of car drivers, paying more for their journeys, and more for everyday products, as the logistics industry would have little choice but pass its increased fuel costs on to consumers," he added.
"Our industry underpins every sector of the economy, and as such is ideally placed to help the government get growth moving, but this cannot happen if the sector is placed under such significant cost pressure."
Carers
In September the AA called for a continuation of the freeze on fuel duty, warning that the voluntary care sector was "losing essential private drivers by the day" in the backdrop of volatile fuel prices.
While organisations can reimburse volunteers under tax-free mileage allowances, the AA says these allowances "don’t meet current costs already" and that a fuel duty increase will make the situation worse.
Katie Thorogood, co-owner of Love Life Care in Ely, Cambridgeshire, told the BBC she may have to reduce her staff and cut services if fuel duty goes up.
She told the broadcaster: "For a small care company like ours, the cost of fuel already has an impact. If fuel duty does go up, we'll have to increase our fees that will impact on our clients.
"This could put people off from wanting to work in the care industry, [which] is already struggling when it comes to recruitment. We might also have to cut down on the areas which we cover."
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