Updated: Fuel duty increase postponed, again

The government's commitment to green taxes has again come under fire as chancellor Alistair Darling announced today that the two pence per litre increase in fuel duty, already postponed until October, will not come into force for a further six months.

The increase, which had originally been intended for this April, will now not come into effect until April 2009. Planned increases in road fuel gases, biofuel duty rates and rebated oils rates will also be delayed.

Mr Darling blamed the hold-up on the economic outlook and growing public unease over the rising cost of living.

"The global credit crunch and sharp rises in world oil prices have pushed up prices at the pump," he said. "Today's decision will help motorists and businesses get through what is a difficult time for everyone."

The move was welcomed by motoring groups who had been campaigning for the postponement.

"We are delighted that the chancellor has seen common sense," said AA president, Edmund King. "The prospect of extra government-inflicted pain was not something that road users were looking forward to."

The Treasury also said that main road fuel duty rates will remain at 50.35 pence per litre after 1 October this year.

However, the decision is likely to anger environmentalists, given that fuel duty rates are some 17 per cent lower in real terms than in 1999.

Green groups have long maintained that despite recent increases in oil prices, the cost of running a car is lower than it has been in the past.

Therefore, a return to the fuel duty escalator, which results in annual above-inflation increases in fuel duty, is required to encourage people to invest in alternative or more fuel efficient forms of transport, they say.

Caroline Lucas MEP, Green Party principal speaker, argued that cutting fuel prices and driving up fuel consumption would only exacerbate the problems posed by rising oil prices.

"Alastair Darling thinks subsidising higher fuel use will help, but that is exactly the thinking that caused the problem in the first place," she said. " The real cost of motoring has fallen by four per cent since 2005, yet the oil lobby has consistently argued for more road building, more traffic, more pollution... The inevitable result is that oil prices - and oil profits - rise. "

Friends of the Earth’s transport campaigner, Richard Dyer, agreed that the government should stand by measures designed to reduce demand for fuel. "Rising oil prices and the threat from global climate change show the government must urgently wean the country off its fossil fuel dependency," he said.

However, the motoring industry argues that even without increases in fuel duty, recent hikes in oil prices are serving to push drivers towards more fuel-efficient vehicles.

Recent figures from petrol retailers suggest that demand has slumped 20 per cent in the last year as drivers cut back on the number of journeys they take, while sales data from auto manufacturers has shown less demand for gas-guzzling SUVs and more for smaller vehicles.