Business chiefs plead for cut in petrol duty

BUSINESS leaders have called on the Chancellor to make a temporary cut in fuel duty, which accounts for almost half of the cost of petrol at the pumps.

Graham Leach, chief economist at the Institute of Directors, said: "This is a grossly distorted market already - 47p of the 97p pump price for fuel is going in taxation.

"We can't do anything about the oil price immediately - clearly the government hasn't got control there - but it can do something about the tax burden.

"When hauliers are being pummelled by high oil prices and a high tax burden, then we want the Chancellor to give a temporary reprieve there."

Mr Leach said Gordon Brown should extend the current freeze on fuel duty throughout 2006.

But the Chancellor has been keen to deflect attention away from his fuel tax policies.

At the Trades Unions Congress in Brighton today, he will renew his calls for OPEC, the cartel of oil-producing countries, to produce more oil and thus lower prices. He will say he is doing this in sympathy with motorists.

"It is because we understand the problems faced by hauliers, farmers and motorists at a time of doubling oil prices... that we must tackle the cause of the problem," he will say.

He will call for "concerted global action to bring down world oil prices and stabilise the market for the long term". Mr Brown has made this call several times at finance ministers' meetings, but made little headway.

Shadow transport secretary Alan Duncan said Mr Brown was wrong to blame OPEC countries for the price rise and said it was a crisis of his "own making".

He said: "Gordon Brown should stop trying to distort the issue by claiming it is a problem caused by OPEC and global oil prices. The key issue is the differential prices for filling up tanks on the continent and in Britain."

Mr Duncan added: "Even if OPEC, which is far weaker than it was 30 years ago, increased production, we've still got bottlenecks at refineries. So even if you had more crude oil coming on to the market, it is still difficult to turn it into the kerosene.

"Judging by his [the Chancellor's] interview on the Andrew Marr programme on Sunday, he thinks he can dance around and save the world single-handed. Well, he can't."

Mr Duncan said he had "enormous sympathy" for the protesters but he added: "I would not support any disruption caused by such protests.

"It's a pity they have to resort to such things just to make Gordon Brown understand a little bit more about the oil business."

Environment campaigners have urged the Chancellor to resist pressure for a cut in fuel duty and claimed the real cost of motoring was lower now than when Labour took power in 1997.

Friends of the Earth campaigns director Mike Childs said: "Cutting fuel duty will send all the wrong signals about the government's commitment to tackling climate change."

Jeremy Nicholson, Director of the Energy Intensive Users Group, said: "Energy prices in Britain have risen enormously for manufacturers, as they have for all consumers and indeed as they have elsewhere in Europe and across the world.

"Unfortunately, the increase seems to have been larger here for British industry than for many of our competitors. We found gas prices year on year increasing by an average of 47 per cent and 34 per cent of an increase in electricity costs."

Mr Nicholson said one of the side effects of being connected to an as yet unliberalised European market was that there seemed to be a distortion arising and UK prices were much higher than on the Continent.

"Ironically, despite having benefited for a number of years from liberalised markets, we now have higher prices than our competitors in Europe."

Matthew Carrington, of the Petrol Retailers Association, said:

"For the good of the economy, for the good of motorists, the Chancellor should be ensuring he only takes the same amount of tax as when fuel was at a lower price."