How much would cutting fuel taxes cost – and what impact does it have on Sunak’s war chest Business

Rishi Sunak’s plan to ease the pain at the pump by cutting fuel taxes is expected to cost £2.5billion but would be just a fraction of the possible £75billion war chest available to the Chancellor as tax revenues soar.

The Treasury was considering a 5p per liter cut in fuel duty after pump prices hit their highest level on record last week.

Fuel duty has been frozen for over a decade at 57.95p a liter but the proposed cut would cost the Chancellor around £2.5billion.

Mr Sunak faces growing pressure to put in place measures to protect households from the fastest rise in the cost of living in 30 years.

However, plans to cut fuel taxes would only make a small dent in the extra fiscal room Mr Sunak has.

Goldman Sachs estimates that the Chancellor’s leeway over his fiscal rules has fallen from £25bn to between £45bn and £75bn due to the sharp increase in tax revenue offsetting higher service charges from the debt.

Its economists said the improvement would give it “the ability to announce a very stimulus budget if it so chooses”.

Mr Sunak has hinted that he is considering a cut in fuel taxes to ease pressure on family budgets.

“We recognize the importance of people being able to fill up their cars, and that it doesn’t cost too much,” he said on Sunday. “Where we can make a difference, of course we will.”

Petrol soared above 165p a liter after Russia’s invasion of Ukraine sent oil prices soaring. The cost of filling the average family car jumped above £90 for the first time last week, according to the RAC. However, a pullback in oil prices should soon start to ease some of the pressure at the pumps.

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This notice was published: 2022-03-21 09:30:32

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