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By Peter Hoskin
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You’d never have guessed
it: petrol prices are set to rise. Thanks to soaring wholesale prices and a
weakening pound, the cost of a litre at the pumps has already gone up by 6p
over the last month. But according to the President of the AA – whose comments
are reported in
today’s papers
– there’s another 3p rise to come. And then? One assumes it
will go higher still.

All of this will be
achingly familiar to George Osborne. It seems that ahead of every Budget or Autumn
Statement he’s faced concerns about petrol prices, and demands for him to act –
and this time is no different. This time, the Petrol Retailers’ Association has
written to the Chancellor asking him to cancel a 1p rise in fuel duty set for
this September. “We have had no reply,” deadpans their chairman to
the Times (£)
today.


Perhaps Mr Osborne hasn’t
pulled out his quill and ink set because he doesn’t yet know what to do. Fuel levies,
after all, are such a troublesome matter for any Chancellor. You can postpose
hikes in the duty or even cut it – as this Government has done – and it’s still
barely a drop in the oil field. Taxes, overall, account for about 60 per cent
of the pump price, and that’s before we get onto external factors such as those
affecting costs at the moment. With the cause of deficit reduction faltering,
the fiscal conservative in Mr Osborne might be reluctant to keep acting on fuel
duty, with a penny here and there, when it has so little real effect.

But Mr Osborne, Party
Strategist will also be acutely aware of how politically dangerous petrol prices
can be. It was, don’t forget, fuel which gave the original Blair government its
first real shock
in the polls – and the issue has retained its potency since. Indeed, according
to a poll in the Sun on
Wednesday
, the public wants fuel prices to be the Chancellor’s top priority
in the next Budget. There’s far more support for a significant cut in fuel duty
than for the reinstatement of the 10p rate. Perhaps Mr Osborne will want to
act, if only so he is seen to be acting.

Although I remain fairly
keen on the idea of a restored 10p tax band, that Sun poll does add further
weight to the question that Paul Goodman asked yesterday: “What
would lower earners prefer – lower taxes or cheaper energy?”
Come the next election,
the numbers on people’s receipts and credit card statements could matter more
than those in their tax bill.

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