Fuel duty rising with inflation is ‘fiction’ and could damage credibility of forecasts, MPs warn
MPs have called for an end to Whitehall’s ‘fiction’ that fuel excise duty will rise with inflation.
For the past 12 years, the Office for Budget Responsibility has produced forecasts that assume fuel taxes will rise with inflation – only for the chancellor to freeze the excise tax.
A Treasury Committee report published today calls for a policy change to avoid undermining the credibility of OBR forecasts.
Jeremy Hunt is expected to keep a 5p rebate announced last year, and could also refreeze fuel duty when he delivers his budget in March.
Jeremy Hunt is expected to keep a 5p rebate announced last year, and could also freeze fuel duty
Chancellor would like to keep fuel costs down because he thinks imposing extra charges on motorists would be ‘politically toxic’
He would like to keep fuel costs down because he thinks imposing extra charges on motorists would be “politically toxic.”
Both measures taken together would cost £6bn a year, which would put a dent in the assumptions underlying the OBR’s forecast for the country’s financial aid.
The commission’s report will say: ‘The MPs recommend that the Treasury should assume there will be no inflation-related fuel tax increase when providing the OBR with a policy assumption for future projections.
“This would more accurately reflect the recent path of fuel taxes and provide a more credible forecast.”
Tory Harriett Baldwin, the chair of the committee, said: ‘After years of fictitious fiscal forecasting, it is time for the government to accurately reflect the true path of the fuel tax.
“This would allow the OBR to make a more credible prediction.”