Believing that a duty cut will do little to help the poorest in society and would be detrimental to the environment, Nawaz Haq, executive director at SulNOx Group Plc, a firm specialising in the decarbonisation of fuels including petrol and diesel, said pledges by a number of the candidates were designed to grab headlines, but ‘are unsustainable and poorly targeted’.
Cuts would fuel inflation
Last week Penny Mordaunt, who was, at that time, in second place in the race to become PM, vowed to slash fuel duty by 50%. But a leading official at the International Monetary Fund (IMF) said tax cuts would be a mistake and could fuel inflation.
And in a recent report by think-tank the Resolution Foundation, Dr Jonathan Marshall stated: “There is clear rationale for Government helping those for whom higher transport costs are squeezing budgets. But doing so through cheaper fuel would see more benefits flow to those who are in less need of help. In fact, by spending more than twice as much on petrol per week as the poorest tenth of households, the richest tenth of families would pocket most of the savings on offer.”
Mr Haq said: “In the current climate, of course reductions in taxes would be welcomed but they have to be effectively targeted and be sustainable. Based on reports we have seen across the UK and Europe, more aggressive fuel duty cuts may not be the right route to helping those most severely affected by the cost of living crisis.”
A recent report by the New Economics Foundation highlighted that the combination of cutting fuel duty by 5p and changes to National Insurance contributions will result in just £90 a year being put back in the pockets of the poorest tenth of households, compared to £580 for the richest tenth.
Cuts or climate?
“And there is also another issue here that we can’t ignore. We are in the midst of a climate crisis as well as a cost-of-living crisis, but one does not mitigate the other,” said Mr Haq. “If we refuse to tackle the climate crisis, it is again the poorest in our society who will suffer. It is interesting that, while the country swelters and a national emergency is declared due to the effects of climate change, the subject has barely entered the leadership contest.
“The UK government, in its policy statement on the end of the red diesel rebate, said that higher fuel prices encourage the take up of greener and cleaner vehicles and push users to improve efficiency or to use less fuel. By the government’s own admission, a fuel duty cut cannot be good for the environment and goes against the fabric of the government’s Net Zero Strategy, which is currently in the midst of being legally challenged.
“I know it is not a popular thing to say, but we cannot look at short-term gain that will cause real long-term suffering. Any suggestions of tax cuts have to be understood and targeted properly and be sustainable both in terms of the economy, and the climate.”