Michael Gove grilled by host on cutting VAT on fuel bills

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The 5p per litre reduction in fuel duty was implemented in March to help drivers with fuel prices amid Russia’s invasion of Ukraine, the cost of living crisis, and rising wholesale prices. According to the RAC, UK diesel prices have hit a record breaking high of just over £1.80 per litre as Russian sanctions increase costs for retailers.

RAC spokesperson Simon Williams told the BBC: “Efforts to move away from importing Russian diesel have led to a tightening of supply and pushed up the price retailers pay for diesel.”

He added: “Unfortunately, drivers with diesel vehicles need to brace themselves for yet more pain at the pumps.”

The RAC has also said that fuel retailers are making an extra profit of 2p per litre on average, more than they were before the fuel duty cut was introduced by the Chancellor Rishi Sunak.

The Business Secretary wrote to the top fuel providers on Tuesday “to remind them of their responsibilities” to motorists. 

Mr Kwarteng’s letter said that motorists “are rightly frustrated that the Chancellor’s fuel duty cut does not appear to have been passed through to forecourt prices in any visible or meaningful way.

“It is also unacceptable that different locations even within the same retail chain have widely different prices.”

He added that both he and Mr Sunak wanted to “re-emphasise” the “expectation that members do everything possible to ensure drivers are getting a fair deal”.

The Business Secretary has contacted the Competition and Markets Authority which has been “closely monitoring the situation” in forecourts. 

However, executive director of the Petrol Retailers Association Gordon Balmer said that comparing wholesale prices with those at the pump “only gives a partial picture” and “do not tell the full story”.

He added that it does not account for “additional expenses” like delivery and storage costs and that retailers’ margins were “often not enough to cover operating costs”.

Mr Balmer stated that there needs to be a further reduction to fuel duty as rising oil prices have “effectively cancelled out” the initial reduction.

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He said: “Five pence per litre did not represent a substantial enough cut to ease the burden of rising prices on motorists.

“While the Chancellor was announcing it, oil prices rose and effectively cancelled out the reduction.”

Mr Balmer concluded: “In addition to this, sales volumes of petrol and diesel are still not back to their pre-pandemic levels.

“Supermarkets and independent fuel retailers are competing vigorously with each other on the thinnest of margins.”

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