Fuel duty and unfair petrol prices hitting economy, say motoring groups

'Unfair' fuel taxes and wholesale petrol prices are hitting drivers and causing lasting damage to the UK economy, business and motoring groups have warned.

The report by the Institute of Economic Affairs (IEA) argues that 'destructive' fuel duty prices puts 'companies at a competitive disadvantage and acts as a disincentive to work.'

In separate report, the AA added to growing discontent towards petrol retailers, revealing that falling wholesale fuel prices have not been reflected by prices at the pump.

The concerns follow a week of Parliamentary debates into the planned 3p fuel duty increase in January. Although any official announcements will be made in next month's Autumn Statement, the Government hinted at a possible delay in the tax saying it was 'determined' to help struggling households.

Calling for the rise in fuel duty to be cancelled, the IEA's head of transport Richard Wellings said: "Fuel duty in the UK has risen to exorbitant levels. Motorists are being unfairly treated by the Treasury. It's time politicians realised that when they tax so heavily they damage the economy. This is especially true when it comes to a tax like this which puts British businesses at a competitive disadvantage."

"Cancelling the planned rise in fuel duty should be a priority in the autumn statement. But this is not enough. Delivering on economic growth means reducing transport taxes over the longer term and bringing in more private sector investment," he added.

Echoing the IEA, the Forum of Private Business (FPB) said that fuel duty should be frozen for the foreseeable future.

"A 3p rise in January would be nothing short of economic vandalism in the current climate, and conceivably be the worst possible start to the New Year for cash strapped small businesses," it said.

Meanwhile, the AA's president Edmund King called for transparency within the wholesale petrol market.

"Recent political focus has been on the 3.02p-a-litre fuel duty increase, scheduled for 1 January, either ignoring or unaware that duty's ugly sister, unrestrained wholesale prices, has been running rampant in the fuel market."

European wholesale petrol prices fell from around 54p a litre at the start of October to 45p at the end of the same month. The AA estimates that this should have reflected a 10p decrease in consumer prices, however, prices at the pump moved down less than 4p a litre.