The Chancellor is set to freeze fuel duty due to the reliance on cars during the pandemic

  • The Chancellor has reportedly ruled out a rise in fuel duty.

  • Rishi Sunak may extend the initiative under which drivers of electric company cars pay no benefit-in-kind tax until April 2021.

  • The budget on 3 March 2021 is expected to extend COVID support packages until at least the end of June.


Rishi Sunak has ruled out a rise in fuel duty after concluding that reliance on cars as a transport safety measure during the pandemic is still too great, Treasury sources have revealed.


The Chancellor is understood to have seriously considered an increase before his previous budget last March, as he is keen to send a signal about the UK Government's green agenda.


The Treasury also considered a rise of up to 5p per litre from March 2021 on the assumption that the UK would be back to somewhere near normal transport use.


"More people are still using cars as a safer mode of transport", a Treasury source said. "And there is a massive cost to electric vehicles at the moment - that feels like the priority to address".


The Chancellor may also extend the initiative under which drivers of company electric cars pay no benefit-in-kind tax until April 2021.


The decision not increase fuel duty means it has been frozen for 10 years at 58p per litre after a major campaign by tabloid newspapers that is estimated to have cost the Treasury more than £50bn in lost revenue.


A rise in future years is seen as inevitable, however, as more motorists switch to electric cars, which could lead to a steep fall in the Treasury's revenues unless it increases the duty.


A letter to Rishi Sunak from MP's, organised by the campaign Fair Fuel, urged The Chancellor not to increase fuel duty, and even to consider a cut.


The letter from 26 MPs said "any potential rise would disproportionately impact the lower paid and workers outside of London" and pointed to the Prime Minister's pledge in 2019 not to raise the tax.


The budget on 3 March 2021 is also expected to extend COVID support packages until at least the end of June. The Prime Minister's roadmap for lifting restrictions anticipates that all limits on social interaction will be be lifted by 21 June 2021.


That will include extending the furlough scheme, which is expected to cost up to a further £4bn per month, the business rates holiday for the retail, hospitality and leisure sectors and the VAT cut for the hospitality and tourism. It also appears likely that the stamp duty holiday will also be extended.

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