Relief For Motorists As Duty On Fuel Is Cut

Motorists finally got some good news today - as duty on fuel was cut by 1p a litre in the 2011 Budget.

Chancellor George Osborne said he was scrapping a planned 1p rise announced by Labour and due to come into effect next month.

Instead, he announced a cut of 1p a litre which would come into effect at 6pm today.

And he also outlined a Fair Fuel Stabiliser to help keep costs down in future - to be funded by an increased levy on oil and gas production.

Under the stabiliser, when fuel prices go up, fuel duty will fall. And when prices go down, duty will rise.

The news came as fuel prices at the pumps reached new record highs, with diesel passing the 140p a litre mark for the first time.

The average cost of petrol is now 133.46p a litre, with diesel at 140.01p a litre.

Drivers were paying 116.71p a litre for petrol and 117.42p for diesel a year ago.

By the start of this year, prices had climbed to 125.19p a litre for petrol and 129.30p for diesel.

AA president Edmund King said: "A 10p rise in the pump price of diesel since the start of the year, equivalent to an extra 5 for even the smallest of tanks, is a staggering extra burden on private and business drivers."

Forecourt owners say that they have not profited from the high prices.

Jim Keary, a forecourt manager in Northampton, told Sky News that sales have fallen by 20% since December.

He added that even when he's charging £140.9p for a litre of diesel, his profit is less than 2%.

"People come in and they moan about the price. Rightly so, it is expensive, but we have to charge a little bit more than what we pay for it to make a living really," Mr Keary said.

High (Berlin: HIH.BE - news) fuel costs have an effect on virtually all sectors of the economy, leading to higher prices all the way down the supply chain, while also reducing consumer spending.

EM Rogers is a family-run haulier, operating 65 lorries from its base just outside Northampton.

A year ago the cost of a tank of fuel for one lorry was £1,349, now it's costing £1,582 per vehicle and that is having a dramatic effect on business.

"We need some relief, we need some help as an industry. It could be another British industry down the pan if we're not very careful," Ed Rogers said.

While the company is charging many customers a fuel surcharge, it is not passing on the full cost of the recent price rises.

Meanwhile, Oil and Gas UK which represents the offshore oil industry said it was "shocked" by the increased charge on producers.

Its (Paris: FR0010370163 - news) chief executive Malcolm Webb said: "Today's move in the Budget runs counter to the Government's stated desire to promote growth, jobs and exports - all of which this industry was delivering and will now find much more difficult to sustain.

"Importantly it will also most likely increase this country's dependence on imported oil and gas and thus diminish its energy security."

"This change in the tax regime will decrease investment, increase imports and drive UK jobs to other areas of the world," he added.