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.
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