The analysis shows that keeping the fuel tax reduction in the budget is a policy that favors the richest members of society, as they will save £60 yearly, whereas those with lower incomes will only save £22.
It is anticipated that Jeremy Hunt will declare a continuation of the reduction of 5p in fuel tax implemented in 2022, a suggestion that has garnered praise from the conservative media.
However, the SMF think tank conducted a study and discovered that the freeze, which is predicted to result in a yearly expense of £5bn, is not a smart use of money. It mainly benefits the richest individuals in the country who typically possess a higher number of cars and choose to drive less environmentally friendly vehicles, like SUVs.
According to analysis by the SMF, the fuel duty freeze, initially implemented in 2011 as a temporary measure, combined with a subsequent 5p decrease in fuel duty, has resulted in a loss of £100 billion for the Treasury since 2011.
The two tax cuts to fuel are expected to knock £27bn off Treasury coffers over five years. The Conservatives attacked Labour’s ditched £28bn green investment promise over the same period as ruinously expensive.
Critics argue that the reduction of fuel taxes primarily benefits the wealthy and has minimal positive impact on the economy, particularly as the quality of public transportation declines.
According to the SMF, the lowest 20% of earners would only receive 10% of the overall savings, while the highest 20% would receive 24% of the savings.
“The director of the Transport Action Network, Chris Todd, suggests that enhancing funding for public transportation is crucial in promoting equality and granting individuals improved opportunities for employment, healthcare, and leisure. However, there is a concerning trend of reducing services to offset the decrease in fuel duty. These cuts primarily benefit the wealthy while neglecting the overall economy. It is the disadvantaged who are most impacted by decreased services and the resulting increase in pollution.”
Sarah McMonagle, the head of external relations for Cycling UK, expressed that a significant number of people rely heavily on their cars due to the government’s lack of long-term investment in public transportation, cycling, and walking. This lack of investment leads to limited affordable, safe, and dependable alternatives to driving. McMonagle also stated that integrated transport policies and sustained investment are necessary for addressing this issue, rather than making empty promises to support drivers.
The SMF proposes fairer and eco-friendly options for reducing driving expenses, such as investing in public transportation. This would offer more affordable alternatives for individuals who wish to switch to using public transport, while also reducing traffic congestion for those who prefer to continue driving.
After conducting an analysis, it was discovered that a 10% increase in public transport speed compared to driving resulted in an average household saving of £435 on annual transportation expenses.
According to a recent study by the SMF, electric car owners pay about 50% less for fuel compared to those with traditional petrol or diesel cars. The study also found that if the initial cost of electric cars was equal to that of traditional cars, families could save an average of £900 per year. The thinktank proposes that instead of reducing fuel taxes, the government should invest in building more charging stations and provide assistance to lower-income households for purchasing electric vehicles.
Senior researcher Gideon Salutin of the SMF stated that there is a common belief that freezing fuel duty provides instant relief for low-income households and working class commuters. However, it is these very households that have lower rates of car ownership, drive less frequently, and have more efficient travel habits.
The government is losing billions of pounds annually and depriving low-income families of more affordable alternatives such as public transportation and electric vehicles by limiting fuel taxes. These options could effectively decrease poverty for millions of people; however, we are squandering billions on unfair reductions.
Source: theguardian.com
