Jeremy Hunt freezes duty on fuel and alcohol as he unveils pre-election 'tax-cutting' Budget

6 March 2024, 12:58 | Updated: 6 March 2024, 14:07

Chancellor Jeremy Hunt has delivered a pre-election boost for voters with an extension to the freeze on alcohol and fuel duty.

The Chancellor delivered his Budget in the Commons on Wednesday, in a last bid to win over voters ahead of the general election.

He confirmed that fuel duty will not increase in line with inflation and the 5p per litre cut implemented in March 2022 will be retained for another 12 months.

He also extended the alcohol duty freeze until February 2025.

Speaking in the Commons, Mr Hunt said: "This benefits 38,000 pubs all across the UK – and on top of the £13,000 saving a typical pub will get from the 75% business rates discount I announced in the Autumn.

"We value our hospitality industry and we are backing the great British pub."

The Chancellor first froze alcohol duty in his Autumn Statement until August 2024.

It was due to rise by 3 per cent but will now remain the same for a further six months.

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Read more: Budget at a glance: Chancellor Jeremy Hunt announced National Insurance tax cuts and alcohol and fuel duty freezes

Addressing the freeze to fuel duty, he said: "This will save the average car driver £50 next year and bring total savings since the 5p cut was introduced to around £250.

"Taken together with the alcohol duty freeze, this decision also reduces headline inflation by 0.2 percentage points in 2024-25 allowing us to make faster progress towards the Bank of England’s 2% target."

The Budget also included a 2p cut to National Insurance and pledged to "guarantee rates" for nurseries as part of the government's free childcare plans.

Chancellor Jeremy Hunt appears outside 11 Downing Street as he prepares to deliver Budget

Mr Hunt's decision to maintain the freeze on fuel duty has been welcomed by motoring groups.

The average cost of a litre of petrol and diesel at UK forecourts is around £1.45 and £1.55 respectively, government figures show.

Prices reached record highs of £1.92 for petrol and £1.99 for diesel in July 2022, largely due to Russia's invasion of Ukraine leading to an increase in the cost of oil.

RAC head of policy Simon Williams said: "With a general election looming, it would have been a huge surprise for the Chancellor to tamper with the political hot potato that is fuel duty in today's Budget.

"It appears the decision of if or when duty will be put back up again has been quietly passed to the next government.

"But, while it's good news that fuel duty has been kept low, it's unlikely drivers will be breathing a collective sigh of relief as we don't believe they've fully benefited from the cut that was introduced just two years ago due to retailers upping margins to cover their 'increased costs'.

"This has meant fuel prices have been higher than they would otherwise have been.

"What's more, despite today's positive news it's still the case that drivers are once again enduring rising prices at the pumps, sparked by the oil price going up - the average cost of a litre is already up by more than 4p since the start of the year."

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The alcohol industry has also welcomed the extension of the alcohol duty freeze.

Stephen Russell, founder of Copper Rivet Distillery and spokesman for the UK Spirits Alliance, said: "The Chancellor has raised the spirits of distillers, hospitality businesses and consumers alike.

"Maintaining the freeze announced in the autumn is good news for spirits drinkers, good news for pubs and bars and the wider economy, and good news for the Treasury as it will enhance revenue for the Exchequer.

"Spirits continue to be the highest taxed alcohol category in the UK - most people are shocked to hear that 80% of a bottle of gin is tax. We have the highest spirits duty rate among G7 nations, despite being a national success story.

"We look forward to engaging with HM Treasury on how we improve this."

Scotch Whisky Association chief executive Mark Kent said: "The industry welcomes the Chancellor's recognition of the benefits of continuing the duty freezes beyond August this year.

"That decision supports the Scotch whisky industry, will incentivise investment and, as with previous cuts and freezes, boost Treasury revenue.

"With cost pressures hurting our bars and pubs, not to mention hard-pressed consumers, the Treasury has provided some much-needed certainty and stability for the year ahead."

However, health campaigners have condemned the "appalling" decision at a time of "record high" alcohol-related deaths.

Professor Sir Ian Gilmore, chairman of the Alcohol Health Alliance UK, said: "Increasing alcohol duty is one of the most effective ways to increase Treasury revenue, reduce alcohol harm and protect the NHS.

"It is appalling that once again the Chancellor has passed on the opportunity to boost government spending and improve public health, in favour of a tax break for the multibillion-pound alcohol industry.

"At a time when we are experiencing record-high alcohol deaths and public finances are under extreme pressure, increasing duty is fundamental in reducing the burden caused by alcohol.

"The tax cut afforded to the alcohol industry today is the result of lobbying from powerful multinational corporations. It further highlights the need for an automatic duty escalator to be reinstated to protect the decision from the influence of industry each year."