A recent report published by the Treasury has revealed that when it freezes fuel tax, the government makes more money than it loses in doing so.
This is compared to periods when the duty rises with inflation.The saving in oil costs benefits transportation firms and traders almost straightaway. It also allows them to pass the savings onto their clients.
This means that halting the oil duty rises could lift the economy by up to £7.5bn over 20 years. That’s equal to a 5 per cent rise in GDP.
The government scrapped the oil duty escalator back in 2011. Afterwards they cut oil tax by 1p. Ever since then it has subsequently been frozen on four different occasions.
Although the report is hailed by the transportation sector for identifying the value to the economy of the suspension, environmentalists claim that it disregards the cost to air quality. They also state that it encourages the use of fossil fuels.
Friends of the Earth finances campaigner David Powell disagrees with the government’s policy.“The model of the UK economy doesn’t think about carbon emissions and air contamination. The Treasury is merely interested in the effects it can compare quickly against GDP statistics. The modelling has nothing about, for example, the amount of people who have died as a result of air pollution.
“Financial modelling must not be used as a political weapon. The government want us to concentrate on the bits of the image it wants us to see. They want us to ignore the harm the strategies might cause to people and our atmosphere.”
However, the report advocates that oil duty is not a particularly active means of decreasing transport emissions. Oil use inclines to stay pretty much the same regardless of the duty level. Transport companies have no choice but to pay for it.