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By Peter Hoskin
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PetrolIn
the end, last night’s vote on fuel duty did not yield the scare it might
have: Tory backbenchers voted overwhelmingly in support of the government, and
against Labour’s motion to postpone the 3p rise in duty that is currently
planned for January next year. The government’s majority was 48.

But
this victory may actually have been less easy than it looked — for, to stave
off a rebellion, it appears George Osborne hinted that he will do something
about fuel duty in the forthcoming Autumn Statement. As Robert Halfon put it
yesterday, “the Government is in strong listening mode.”

This
is not necessarily comfortable terrain for the Chancellor. He has already postponed the 3p
rise on two occasions — and the fiscal conservative in him, eager to reduce the
deficit, might balk at denying the Exchequer this money for another few months.
This Osborne might want to draw a line in the sand before a third delay becomes
a fourth, which becomes a fifth, and then a sixth, and so on.


But
I do wonder whether the strategist in Osborne — the Osborne that surfaced
in the Times
today — will actually consider going further than is being
demanded of him, and scrapping the rise altogether. There are three particular
reasons why this might be tempting for the Chancellor:

i) The
internal party politics.
If Osborne does just postpone the rise, then there’s the
continuing risk of more votes like that last night. And that would mean either
cutting deals with Tory backbenchers each time, which could make the Chancellor
look weak, or just succumbing to a damaging rebellion. Of course, scrapping the
3p rise needn’t prevent any calls for further action in future — particularly
as fuel duty would still be rising in line with inflation, at least — but it would
suck much of the poison from the immediate situation.

ii) The
politics of the squeeze.
We learn
this morning
that the squeeze on incomes goes on — headline inflation increased
to 2.7 per cent in October, well above the 1.7 per cent rise in average wages —
and all on the back of allegations
about price-fixing
in the energy markets. So it’s hardly surprising that Ed
Miliband is eager to make the next election the “living
standards election”
; and even less surprising that Mr Osborne is responding
with talk about “people
who work hard and who want to get on”
. But both will know that fuel prices
have to be a key part of any pitch to struggling voters, not least because they
were a furious,
abiding concern
even during the years before the crash.

iii) Do the
economic benefits trump the fiscal costs?
As my old workmate Jonathan Jones explained in
a Coffee
House post
yesterday, the Treasury’s estimates suggest that postponing the
3p rise for three months would cost the Exchequer around £330 million. The National
Institute of Economic and Social Research reckons it’s
somewhere closer to £293 million. But the NIESR also adds that:

“Our
estimates suggest that GDP growth will be 0.1 percentage point lower next year
if this policy plan goes ahead than it would be if the rise in fuel duty were
postponed (a loss of output equivalent to about £1 billion in 2009 prices),
costing 35,000 jobs.”

And
could that be an outcome to scare the Chancellor into postponing the 3p rise
indefinitely?

As
so often, it all comes down to whether money can be found elsewhere — which is
no easy task, with the deficit and debt forecasts slipping as they are. But whether
it’s a three-month postponement, a total annulment, or something in between, I’d
be surprised if the Chancellor doesn’t spot some political gold in them thar
hills.

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