Rising fuel taxes with inflation is a ‘fiction’ and could damage the credibility of forecasts, MEPs warn
MPs have called for an end to the Whitehall ‘fiction’ that fuel taxes will rise with inflation.
For the past 12 years, the Office for Budget Responsibility has prepared forecasts that assume the fuel tax will rise with inflation – only for the chancellor to freeze the tax.
A Treasury Committee report released today calls for a change in policy to prevent the credibility of the OBR forecast from being undermined.
Jeremy Hunt is expected to keep a 5p cut announced last year, and he could also freeze fuel duty again when he hands over his budget in March.
Jeremy Hunt is set to keep a 5p cut announced last year, and he could also freeze fuel taxes
The Chancellor would like to cut fuel costs as he believes imposing additional costs on motorists would be ‘politically toxic’
He is said to want to cut fuel costs as he believes imposing additional costs on motorists would be “politically toxic”.
The two measures would together cost £6billion a year, which would put a damper on the assumptions underlying the OBR’s forecast for the nation’s financial aid.
The committee’s report will say: “MPs recommend that the Treasury assume that there will be no inflation-linked fuel duty increases when providing the OBR with a policy assumption for future forecasts. .”
“This would more accurately reflect the recent trajectory of fuel duties and provide a more credible forecast.”
Tory Harriett Baldwin, chairman of the committee, said: “After years of budget forecast fiction, it’s time for the government to accurately reflect the true trajectory of fuel duties.”
“This would allow the OBR to produce a more credible forecast.”