E&I in bid to reduce the over-reliance on fuel duty

Nearly two years ago, the States directed P&R to review transport taxes, including fuel duty, and report back to the Assembly early in 2024. Having missed that deadline, the senior committee now wants to move the work into a long-term review of public finances which needs to be published by September 2026.

But Environment & Infrastructure president Lindsay de Sausmarez submitted a Budget amendment yesterday calling for P&R to collaborate with her committee ‘to progress without delay the work to reduce the over-reliance on fuel duty’.

It has been estimated that income from excise duty on motor fuel will be £22.5m. next year, based on expectations of a 1% decline in the volume sold compared to this year.

Previous years’ budgets assumed a reduction of 2% annually.

P&R said it was delaying recommendations for changing transport taxes because of the ‘significant impact on motorists’ if they were put up alongside a proposed increase in income tax to 22p in the pound.

Deputy de Sausmarez accepted the delay to looking into other transport taxes, but said there was ‘no good reason’ to avoid dealing with the problems with fuel duty.

‘Irrespective of whatever this or the next States decides in terms of the bigger picture on tax, this work needs to be done to address an increasingly fiscally unsustainable and socially inequitable problem,’ she said.

‘This work will not compromise the wider work on the tax review. It will just make one part of the tax base fairer and more fiscally sustainable sooner.’

Improvements in engine efficiency has caused a decline in the volume of fuel required to travel the same distance, electric and hybrid vehicles have become more popular, and overall fewer vehicles are being registered each year. These changes have prompted the States to increase fuel duty above the rate of inflation in recent years, although P&R has proposed putting it up by 3.2% in 2025, in line with inflation estimates.

Deputy de Sausmarez said the trend on fuel duty also had ‘profoundly inequitable effects’, including on owners of older, fuel-hungry cars, who were often among the least affluent.

She revealed that E&I had already drafted a policy letter in response to declining fuel duty sales but needed P&R’s input and support to bring it to a conclusion.

She believed that a decision dating back nearly 20 years to consolidate all motoring taxes into fuel duty, except first registration duty, was no longer right for the island.

‘The logic underpinning this consolidation was understandable – as well as being easier to administer, it was considered to be economically fairer, moving motor-related taxation to a purely polluter-pays principle,’ she said.

‘However logical and well intentioned, though, there have been significant negative effects that have become increasingly clear over time.’