PM hints at U-turn over fuel duty

PM hints at U-turn over fuel duty

Gordon Brown hinted today that the government will not go ahead with a planned 2p per litre rise in fuel duty.

The prime minister said the final decision was one for the chancellor, Alistair Darling, in this autumn's pre-budget report, but he pointed out that previous increases had not been introduced.

"I think you will find that in most years since 2000 that the duty has actually been frozen," he told the Commons liaison committee of senior MPs.

He added: "It is clearly a matter that will be looked at very, very carefully over the next few weeks."

The 2p increase is due to come into force in the autumn.

However, the Treasury last night refused to back down over controversial plans to increase car tax on the most polluting vehicles bought since 2002, despite backbench rebels' claims that the duty changes would be unlikely to cut carbon emissions.

Backbench opponents said the changes to vehicle excise duty, announced in the spring budget, would also hit the poor as badly as the end of the 10p tax rate.

But their planned protest during the report stage of the finance bill fizzled out as ministers gave private assurances that the tax rates and planned fuel duty rise would be re-examined in the autumn.

A Tory move to stop vehicle excise duty bands applying to all cars registered since 2001 was defeated by 303 votes to 240 - a government majority of 63.

MPs were debating the planned duty rises against a backdrop.....continued below

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of hooting horns from angry road hauliers protesting outside Westminster at the crippling cost of fuel.

The Treasury minister, Angela Eagle, acknowledged that oil prices had doubled in the past year, and said since last October "fuel prices at the pump have risen by 20% even though tax rates have remained unchanged".

She said the chancellor would look at these and all other factors closely when considering whether to go ahead with the planned 2p per litre duty increase.

She said fuel duty had fallen in real terms since 1999 by 16%, adding that if it had risen in line with inflation since 1999 it would have reached 61p a litre, instead of the current of 50.35 a litre.

She added that motoring costs, according to the Office for National Statistics, had fallen by 17%, largely due to the fall in the price of cars and greater fuel efficiency.

The Tories claim 2.3 million families will pay between £100 and £245 more on each car they already own, since changes apply to cars registered since 2001.

Justine Greening, shadow Treasury minister, said there was a problem with "ineffective green taxation that is nothing to do with the environment and is everything about eco-stealth taxes".

The Treasury's take from the rising costs of duty would increase from £1.9bn in 2006 to £4.4bn in 2010 when the measures are fully implemented, Greening told MPs. But annual vehicle emissions would be cut by just 0.16m tonnes a year by 2020, she said.

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