LIVE Budget 2011 coverage

Chancellor of the Exchequer George Osborne delivered his second Budget, mindful of the shortage of public finance and inflation rising from four per cent to 4.4 per cent in January.

The Chancellor said he did not need to impose further pain – claiming that had already been announced in previous Budgets with a number of measures due to come into place next month - and so focused on “a Budget for growth.”

One of Osbourne’s key headline-grabbing statements was a 1p-a-litre cut in the rate of fuel duty, in place of the scheduled inflation-plus-1p-per-litre rise that would have added almost 5p to forecourt prices. 

Prior to the announcement, average UK fuel prices were 133.59p for a litre of unleaded petrol and 140.16p for a litre of diesel - up from 116.1p and 116.9p a litre respectively a year ago.

However, even with the Government able to claim that it is helping motorists, there is unlikely to be much respite from the upward trend.

Responding to the budget, the AA said that the duty cut was a ‘much needed tourniquet to drivers haemorrhaging money from record pump prices. However, volatile oil prices may once again drain much of the benefit of the freeze announced today.’

Key to this is the unrest in North Africa, which has pushed up the price of a barrel of oil up to around USD120, with fears that this could rise to USD140 - a price last seen in 2008. The AA warns that “pressure on pump prices and inflation could grow again” as a result.

Osbourne also confirmed that there will be no further increases in fuel duty until January 1, 2012, when a rise of 3.02p per litre is planned. A further fuel duty increase is scheduled for August 1, 2012. The government has also scrapped fuel duty escalator that was introduced in the 2009 Budget to increase duty by the rate of inflation plus 1p per litre each year until 2014-15.

The SMMT said “The cancelling of the fuel duty escalator is a very welcome move that, combined with the 1p per litre reduction, will see immediate financial pressure on motorists eased. This move will help to boost consumer confidence and economic growth, particularly benefiting the commercial vehicle and haulage sector.”

Increases in company car tax in 2013-14 – tax thresholds will tighten by 5 g/km on April 6, 2013 with the Chancellor confirming already announced thresholds for the next two financial years. Company car tax discounts that currently apply to alternatively-fuelled vehicles have been axed.

The SMMT has also added that it “hopes that part of the [company car tax] proposal includes the removal of the unjustified three percentage point penalty on diesel company cars.”

An increase in the fuel benefit charge from April 6, 2011 - Employees who are in receipt of company-funded fuel used privately will see their benefit-in-kind tax bills rise from April 6. The Chancellor confirmed in the Budget that the fuel benefit charge multiplier will increase from £18,000 to £18,800,

A rise in Approved Mileage Allowance Payments rates from April 6, 2011 - The tax-free mileage reimbursement rate for employees who use their own cars or vans for business mileage will increase to 45p from 40p for the first 10,000 miles from April 6, 2011. However, the rate for mileage beyond 10,000 miles will remain at 25p per mile.

Finally the Chancellor has added a further £100million to the Department for Transport’s £100million fund to repair the country’s potholed roads. However, car insurance firm Warranty Direct added “While the extra funding is a boost to the same amount pledged by the Department for Transport last month, the cash injection alone cannot solve the problem of Britain’s dire roads.”