It looks like George Osborne will put the planned fuel duty rise on hold again, in order to avoid another Tory rebellion and potential government defeat in the Commons.
This battle has its origins in a Labour Budget: that of 2009, in which Alistair Darling introduced a fuel duty escalator whereby fuel duty would increase by inflation-plus-a-penny every April from 2010 to 2013. In his 2011 Budget, Osborne announced that he was abolishing the escalator and instead cutting fuel duty by 1p per litre. From January 2012 onwards, the escalator was to be replaced by a ‘fair fuel stabiliser’, under which the duty rises by inflation-plus-a-penny when oil prices are low for a sustained period, but only by inflation (as measured by the Retail Prices Index) when they are high.
Fuel duty was therefore set to rise by 3.02p per litre on 1 January 2012 — keeping it constant in real terms — and then again by inflation on 1 August 2012. But in last year’s Autumn Statement, Osborne delayed the 3.02p January rise to 1 August and cancelled the original 1 August rise (which was expected to be 1.92p per lite). And then, in June this year, he announced that the 3.02p rise would again be delayed until 1 January 2013 – and it’s this rise that is being debated in the Commons this evening.
A number of Tory MPs have been arguing against a fuel duty rise, and threatening to vote with Labour to delay it at least until April 2013. It seems that Osborne, afraid of another Commons defeat at the hands of a Labour-Tory rebel alliance, has found a compromise with the potential rebels. Robert Halfon, the Tory backbencher who has long been at the front of the campaign against a fuel duty rise, said today