Lobbies tell Rishi Sunak not to hike fuel or wine duty or end entrepreneur tax break to fund fight against outbreak

This article is more than 6 months old

This article is more than 6 months old

The chancellor is under pressure from industry groups to resist the temptation to fund coronavirus spending with tax hikes on business when he delivers the budget on Wednesday.

The RAC said a majority of drivers wanted Rishi Sunak to freeze fuel duty for the 10th year following intense speculation that he plans to increase the duty on petrol and diesel by 2p a litre.

A poll of 3,200 motorists indicated that 59% wants Sunak to reinvest 2p from every litre of petrol and diesel sold, while keeping duty at current levels.

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Twenty-six percent of respondents said they would like to see fuel duty reduced, while just 10% were in favour of an increase.

Sunak is looking at ending the fuel duty freeze as the government looks to encourage motorists to switch to electric cars and other more sustainable transport.

With new car sales significantly lower than just a year ago and many drivers switching to electric vehicles, the Treasury faces the prospect of falling revenues unless it increases the duty quickly.

The Treasury fears a tax hike could be met by street protests in the same vein as the gilets jaunes riots in France last year, which were triggered by increases in fuel duty. But strategists in No10 believe this would be unlikely in the midst of the coronavirus outbreak.

RAC head of policy, Nicholas Lyes, said: “The chancellor might be interested to discover that more than twice the proportion of drivers want to see it kept at its current level compared to those who want to see it cut.

“We believe the only hope for getting the UK’s local roads up to a standard fit for the 21st century is by ringfencing a small proportion of the tax drivers already have to pay every time they fill up.”

The demand comes as business lobby groups seek to prevent tax rises they say will reduce incentives for firms to expand and increase employment.

The Federation of Small Businesses has warned the chancellor that a Tory manifesto commitment to scrap entrepreneurs tax relief, saving an estimated £2.6bn, would harm the UK’s reputation as a business-friendly economy.

Rishi is know to be sympathetic to abolishing the tax break after it emerged it benefited just 5,200 people, most of them among the richest in Britain.

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Meanwhile, a group of MPs – including those on the all-party parliamentary wine and spirit group (APPG) – has written to the exchequer secretary to the Treasury, Kemi Badenoch, urging a cut to wine duty in the budget.

Highlighting “the impact of unfair wine taxes” on consumers, it says duty on wine has increased significantly more than on spirits and beer over recent years – by 12% since the scrapping of the duty escalator in 2014, compared with 2% for spirits and a decrease of 0.2% for beer. The UK has among the highest wine taxes in Europe: a flat rate of £2.23 on a 75cl bottle of still, unfortified wine.

The letter cites new analysis by the Wine and Spirits Trade Association (WSTA) and the campaign group Wine Drinkers UK, which predicts that the average price of a bottle of wine is expected to exceed £6 in 2020 for the first time on record, in part due to duty increases.

Data from Kantar shows the price rise risks alienating 9.7 million ‘budget’ wine shoppers – more than half of those who buy the tipple – who say they don’t buy wine priced over £6.