‘Forget fuel duty freezes – Here are the real ways Labour can help drivers through the Iran crisis’

Unlike statistics on GDP or inequality, the price of petrol is a number every driver sees every day. It’s usually on a big sign on their way to work. And it’s a big reason that the government tends to fret so much about the cost. 

Their concerns are valid. The war in Iran is putting upward pressure on fuel prices. Reform, the Conservatives, and the Lib Dems have all called on the government to freeze fuel duty in response. Their arguments play on anxieties close to Labour members’ hearts, promising to support working people and ease cost-of-living concerns. 

But their arguments are baseless. They lack an understanding of the fuel market and neglect the behaviour of retailers.

Let’s start with their idea that the increase in fuel duty will present a major burden for motorists. Data released today by DESNZ shows that petrol prices are up 13p per litre since the war broke out. And it’s likely to get worse. The 1p increase in petrol, itself only due in September, is minor relative to the international benchmark for crude. Overall, fuel duty itself only represents 17% of driver’s typical motoring costs, and while that’s not nothing, it pales in comparison to upfront payments (34%), and operational costs (27%). Governments have already spent £150 billion on fuel duty freezes over the past fifteen years, worth £3,500 for every driver, but ask any of them if they’ve felt the savings, and few will have even registered them.

READ MORE: ‘The public support net zero; Labour should too’

That means someone else has, and here, the industry is refreshingly open. Following the 5p cut to fuel duty in 2022, Gordon Balmer, executive director of the Petrol Retailers Association, explained “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.” It’s hard to justify a fuel duty cut when retailers themselves say they can’t pass the benefits on to motorists when times are tough.

So why the attention? Although another fuel duty freeze would do little for the average motorist, it would do a great deal for retailers. The RAC has found that following previous freezes retailers refused to pass on the benefits of fuel duty freezes to consumers, with MPs noting that they were instead used to boost their bottom line. In 2022, retailers raised prices by 2p following the 5p cut in duty, while at the same time supermarket fuel margins actually increased. If the chancellor u-turns on fuel duty tomorrow, it would mean £17 billion in lost revenue. That’s a tantalising windfall for retailers looking to increase their margin, not motorists looking to cut the cost of living.

Become a friend of LabourList  and join our community. Our friends support our vital non-factional work and get access to exclusive content and events. 

Meanwhile, the trickle of savings that leak through at the pump tend to be gulped down by the richest drivers. Wealthy drivers tend to use more fuel, as they drive more than lower-income motorists while driving bigger cars. Should the Chancellor freeze fuel duty, the wealthiest fifth of earners will save nearly three times what the poorest save, all while costing the state. 

That’s not to say there’s nothing the government can do. Rather than funnel profits to corporations and wealthy drivers, Labour can open up new routes for motorists that lower their petrol spending. A long-term solution would use the billions which might have been spent on fuel duty freezes to upgrade and expand our public transport network and bike paths, so people aren’t forced to rely solely on cars. 

A more urgent solution lies in social leasing, which would subsidise EV leases for people on lower incomes. The savings these households would generate in one month are worth more than the savings from fuel duty over an entire year. And by targeting working people, it’s cheaper. For £163 million – the same money being spent on the electric car grant – we could put an additional 93,000 EVs on the road, all costing just a fraction of the amount retailers are begging the Chancellor to spend on another pointless fuel duty freeze.

You might have noticed that this article’s title uses an alliteration, and although I’d have liked to substitute “Forget fuel duty freezes” with another F-word, Comms said I’d better not. 

But it does indicate my frustration after years of dealing with the same false arguments. Since the 1970s, foreign wars have been pushing up petrol prices, yet policymakers have continued to subsidise oil and gas giants rather than urgently move drivers off the fossil fuels that leave them vulnerable. 

Freezing fuel duty now would only kick the fuel can down the road, harming drivers in the long term while doing nothing for them in the short. Getting funding for the exchequer, working towards net zero, and supporting hard-pressed motorists are not inseparable goals. In fact, it’s essential for drivers that they align. 

Subscribe here to our daily newsletter roundup of Labour news, analysis and comment– and follow us on TikTok, Bluesky, WhatsApp, X and Facebook. You can also write to our editor to share your thoughts on our stories and share your own. The best letters are published every Sunday.

• • SHARE: If you have anything to share that we should be looking into or publishing about this story – or any other topic involving Labour– contact us (strictly anonymously if you wish) at [email protected].
  • SUBSCRIBE: Sign up to LabourList’s morning email here for the best briefing on everything Labour, every weekday morning.
  • BECOME A FRIEND: If you enjoyed this, why not consider becoming a Friend of LabourList? Help sustain our journalism, and of course Friends do get benefits… 
  • PARTNER: If you or your organisation might be interested in partnering with us on sponsored events or projects, email [email protected].
  • ADVERTISE: If your organisation would like to advertise or run sponsored pieces on LabourList‘s daily newsletter or website, contact our exclusive ad partners Total Politics at [email protected].