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BUDGET: Delayed fuel duty increase not all it seems

Despite what the chancellor said in yesterday’s budget speech, the cost of fuel at the pumps will rise by 2.35p per litre from April 1.

In his speech, the chancellor said he would stagger the introduction of the planned fuel duty hike, which would have seen 2.76p per litre added to every litre of fuel next month.

This was greeted with applause by most industry commentators.

However, the Petrol Retailers Association has pointed out that the chancellor omitted to mention that an incentive on biofuels comes to an end on April 1, meaning the cost of fuel will rise.

The chancellor failed to mention that, in addition to the 1.0ppl duty increase from 1 April, he has already taken measures to claw back a duty incentive provided to the refiners for biofuels production.

This latter measure will result in an increase to the cost of product by up to 1.0ppl also from 1 April,” explained Brian Madderson, RMI chairman.

“Thus the real increase to the motorist at the pump will be 2.0 ppl plus the VAT multiplier equating to around 2.35ppl – some 135% more than might have been perceived from his speech to the House.”

In addition to this 2.35ppl increase in fuel costs from the start of April, fuel duty goes up again by 1ppl on October 1, then 0.76ppl on January 1, 2011.

Fuel duty will also rise by 1% above inflation – likely to be the equivalent of another 1ppl in real terms - on 1 April each year from 2011 to 2014.

" Drivers spend about 15% of their disposable income on motoring and when it comes to fuel prices, every penny really does count,” said Professor Stephen Glaister, director of the RAC Foundation.

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