Budget ‘U-turn’ axes 3p fuel duty rise

Chancellor George Osborne announced the rise in his budget in April, but today said he was using £500m of departmental savings to pay for the tax cut. He has also frozen fuel for the rest of the year.

“We are on the side of working families and businesses and this will fuel our recovery at this very difficult economic time for the world,” he said.

In an article in the Sun on Tuesday, shadow chancellor Ed Balls had urged Mr Osborne to scrap the proposed 3p rise, funded by an underspend from the Olympics.

This is the fastest U-turn in history. Ed Balls, shadow chancellor

Mr Balls said there had been a 20 per cent fall in oil prices since Christmas that had not affected the cost of fuel and called on the government to postpone the rise till January 2013.

The economic secretary to the Treasury, Chloe Smith, denied that the decision was a U-turn. She told Channel 4 News that funding for the tax cut would come from departmental under-spends [see below], but added that the full details of the surplus funds available had not yet been finalised.

“We are confident we have the funds available,” she said. “I will be able to return to you with the detail at the Autumn statement.”

Tim Yeo, Conservative MP and chair of the climate change select committee said that cancelling the fuel duty price rise was not a priority for him.

“I think the priority should have been to continue working to take all the low income families on less than £10,000 out of tax. That’s a coalition commitment…and I think spending the money in that way would have reached more low income families.”

U-turns

Mr Balls said after the announcement: “This is the fastest U-turn in history. Labour called for this help for families and businesses this morning and I welcome the fact the chancellor backed down this afternoon.

“With U-turns on petrol, pasties, caravans, charities and churches, George Osborne’s budget is now in tatters – a truly omni-shambles of a budget from a part-time chancellor whose reputation is now badly damaged.

Had the government not taken action, Labour was prepared to table an amendment in the Commons.