HISTORIC PRESS RELEASE : Confirmation of inflation increase of fuel duties [September 2003]
The press release issued by HM Treasury on 25 September 2003.
Following the Budget announcement that the annual revalorisation of fuel duties would be deferred for six months until 1 October due to international uncertainties, with the military conflict in Iraq and the volatility of oil prices, the Treasury today confirmed that, as planned, fuel duties will increase in line with inflation on 1 October by 1.28 pence per litre.
The legislation for this change was passed by Parliament in the Finance Act on 10 July 2003. Since the Budget, the uncertainty for other regional oil-producing nations has lessened. The volatility of oil prices at the time of the Budget has now diminished and oil prices have become more stable.
Since 2001, fuel duty has been reduced by 13 per cent in real terms.
Notes to editors
1. The Chancellor said in his Budget speech in April: “Owing to the recent high and volatile level of oil prices as a result of military conflict in Iraq, I have decided to defer the 1.28 pence a litre annual revalorisation of fuel duties until six months from now – 1 October – and will legislate to this effect. And if the current international uncertainties and volatility remain I will not proceed with the change at all.”
2. Yesterday’s OPEC meeting in Vienna agreed a small cut in output in response to the fall in prices expected to follow normalisation of Iraqi production, but OPEC expects prices to remain near the middle of the $22-$28 price band into 2004 and stresses the importance of “maintaining price and market stability in 2004 and thereafter”. In its World Economic Outlook for 2004, the International Monetary Fund said: “Markets expect prices to be sustained through 2003. By late next year, however, many analysts believe prices could fall sharply – to levels significantly lower than suggested by current futures”. The communiqué issued after Saturday’s meeting of the G7 countries in Dubai also stated that “Oil prices are expected to remain stable”.
3. Since March 1999, the duty rates on the main types of petrol and diesel have not risen in real terms. Duty rates rose in line with inflation in March 2000, were cut by 2 pence and 3 pence per litre in March 2001 and have been frozen since then, representing a cost to the Exchequer of £1.8 billion or a reduction in real terms of 13 per cent, while the switch to Ultra Low Sulphur Petrol during this period has helped progress towards environmental goals.
4. In the month before the Budget oil prices fluctuated within a range of $24 to $33 a barrel. The price per barrel has remained more stable in the range $25 to $29 in the past month.
