However, the ATT has warned that the Government must now put a plan in place to deal with declining revenues in a message to Rachel Reeves ahead of the Autumn Budget.
Jon Stride, chair of the ATT’s Technical Steering Group explained: “The future of fuel duty has been seen as a problem for down the road, but last week’s figures show we are speeding towards decision time.
“Fuel duty currently raises nearly £25 billion a year, but successive freezing of fuel duty mean it hasn’t been increased for over 12 years. VAT is charged on the duty-inclusive price of fuel, so VAT revenues would have been boosted by any increase as well.
“However, the growing number of people using electric cars means any increased tax take from raising fuel duty is only likely to be temporary. Replacements will need to be considered, such as increasing taxes on electric vehicles or even mileage pricing, with drivers taxed based on how far they drive in a year.”
Fuel duty is paid by every petrol and diesel driver every time they top up their vehicles at fuel stations. The drop in fuel duty is partly down to an increase in motorists ditching combustion models for electric cars.
Motorists currently pay a 52.95p per litre fuel duty rate after a temporary 5 pence cut was introduced by the Conservatives in 2022, also maintained by Labour. Campaigners such as FairFuelUK have passionately opposed increases, but the ATT warns that changes are inevitable.
Jon added: “Whatever happens to fuel duty in the future, the government needs to urgently address how they will replace fuel duty in a post-petrol and diesel world if revenue levels are to be maintained.”
Express.co.uk has contacted the Treasury for comment.
