Chancellor of the exchequer Jeremy Hunt today [6 March 2024] announced the long-awaited Spring Budget. Amongst the policies announced was the decision to freeze fuel duty at its current rate.
In his opening remarks to the House of Commons, Hunt said: “In recent times the UK and the UK economy has dealt with a financial crisis, a pandemic and an energy shock caused by war in Europe”, which he described as “the most challenging economic headwinds in modern history”.
In the 2023 Spring Budget, it was announced that the government would spend ‘over £5 billion’ maintaining fuel duty at the same level, including keeping the 5p cut in place. Today the chancellor confirmed that fuel duty is set to be maintained at current levels for the year ahead.
“If I did nothing,” Hunt said, “fuel duty would increase by 13% this month, so instead […] I have decided to maintain the 5p cut and freeze fuel duty for another 12 months.”
With fuel costs being a key concern for fleet operators, the freeze in fuel duty will come as a relief for many in the logistics and supply chain industry.
David Bushnell, director of consultancy and strategy at fleet management consultancy Fleet Operations, commented: “In the midst of a pivotal election year, the unveiling of the UK chancellor’s Spring Budget has inevitably garnered widespread attention, not least from the fleet transport sector.
“With political tensions high and economic forecasts under keen scrutiny, it will be regarded by many as an indicator of the government’s policy priorities and financial strategies.
“The decision to cancel the planned increase in fuel duty, effectively freezing it at its current rate, must be welcomed. The move – in the wake of the biggest monthly rise in fuel prices in five months in February – offers a financial reprieve for the fleet sector amidst considerable economic pressures and the burgeoning challenges of operating fleets in the current economic climate.
“However, whilst there will be no additional fuel cost burden for operators of petrol and diesel vehicle fleets in the short term, it is important to highlight that while this measure aids financial planning, it does little to advance the broader objective of transitioning to more sustainable modes of transport.”
Balancing sustainability and cost
Sustainability and cost are two major concerns when it comes to road transport, often competing as priorities in government policies and company strategies. Hunt criticised the Labour Party’s £28bn green pledge, announced in September 2021, which Labour leader Sir Kier Starmer has since scaled back and delayed.
In an interview with Sky News in February 2024, Starmer said: “What won’t now happen, is that we won’t make further or new investment decisions, and that means that we won’t reach the £28bn envisaged and that figure is effectively stood down.”
Speaking to the House of Commons today, Starmer described the Spring Budget as “the last desperate act of a party that has failed”.
He confirmed that Labour “supports the fuel duty freeze” but asked that the chancellor “set out how we will make sure that this policy gets passed on to hard-pressed families at the pump”.
On the matter of government support for road transport decarbonisation, Bushnell added: “The long overdue promise of making full expensing apply to leased assets will help support investment into low- and zero-emission commercial vehicles, but the government has missed a crucial opportunity to encourage electric vehicle (EV) adoption, especially electric vans, by failing to reduce the VAT rate on public charging.
“The cost of running EV fleets, particularly those that rely on public charging stations, remains a significant barrier to adoption. A reduction in VAT on public charging could have served as a strong incentive for fleet operators to accelerate their shift to electrification, aligning with the UK’s ambitious environmental targets.
“The government’s commitment to environmental sustainability and reducing carbon emissions is well-noted, but the actions to support these commitments, especially in the context of fleet transport, require more work.
“The transition to electric vehicles is a critical component of our collective efforts to combat climate change and reduce air pollution. It is essential that policy measures, including fiscal incentives, align with these objectives to encourage a faster and more economically feasible shift towards greener alternatives.”
For more on electric vehicles in the logistics sector and a Q&A with the House of Lords Environment and Climate Change Committee’s Baroness Parminter discussing the government’s electric vehicle policies, check out this feature in the March issue of Logistics Manager!
