£7.5bn boost from fuel tax freeze

Fuel tax curbs will boost the economy by 7.5bn over 20 years, the Government says

Fuel tax curbs will boost the economy by 7.5bn over 20 years, the Government says

First published in National News © by

Halting fuel duty rises will boost the economy by up to £7.5 billion over 20 years, according to the Treasury.

The Government has stopped planned increases, including one due to come in this month, which means duty is around 20% lower than it would have been, it said .

But around half of the initial lost revenue to the Exchequer as a result of the changes will be generated through the increased growth, its analysis found.

The research, known as dynamic modelling, plots out the expected impact of policy on the long-term growth of the British economy and shows that over the next two decades it increases gross domestic product by up to 0.5% - around £7.5 in today's prices and around £300 per ho usehold.

Since 2011 the fuel duty escalator has been axed with four planned increases scrapped, while one penny per litre was cut in March 2011.

"Were it not for the Government's actions, fuel duty would be going up this month to around 72p per litre," the Treasury said.

"Instead, there will be no rise this April, and thanks to the Government's actions over the parliament, fuel duty is approximately 20% lower than it otherwise would have been, at around 58p per litre."

The Treasury said the figures were calculated using a "state of the art model" that computes the wider "dynamic" impact to the whole economy of tax changes rather than just the static cost to the exchequer.

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