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In the background of poor economic news, Alistair Darling may reverse expected fuel duty tax rise.
A surge in world oil prices places mounting pressure on the Chancellor to scrap plans for a rise in fuel duty next week.
Motoring groups claim that if he went ahead with a planned 2p a
litre increase, car drivers could soon by paying as much as £5 a
gallon.
The soaring oil prices came as Mr Darling is being buffeted by
the credit crunch, rising government borrowing and a world economic
slowdown.
The Chancellor, whose credibility is at stake after the
Northern Rock crisis, now has less than five days to decide whether to
go ahead with a range of punitive taxes on motorists.
The price for a litre of petrol has risen to 105.7p, compared
with 88.32p a year ago, after the benchmark for Brent crude oil hit a
record high of £51.09 ($102.61) a barrel.
With families already feeling the effect of higher food and
fuel prices, he has been warned any further increase could damage
Labour at the ballot box.
Business leaders, motoring groups, the National Farmers' Union
and retailers all called on Mr Darling to think again about raising
petrol duty.
Sheila Ranger, of the RAC Foundation-said: 'The impact of fuel
prices on family budgets is really severe.' She added: 'In some
families we're talking about food or fuel.'
Edmund King, of the AA, echoed the concern, saying: 'Record
pump prices already hit those on low incomes, rural, disabled and many
car-dependent motorists, so an extra increase would be unjust, unfair
and unnecessary.'
Mr Darling's main pitch in the Budget will be that he and
Gordon Brown are the best men to steer Britain through choppy economic
waters ahead. He will contrast Labour's record with the uncertainty of
handing control over to the untested David Cameron and George Osborne.
But the Chancellor's room to manoeuvre is restrained by the global
slowdown and the state of the Government's finances.
In his last Budget, Mr Brown forecast borrowing of £30bn in
the next fiscal year. This was revised up to £36bn by Mr Darling in
November, and experts expect this target could be ratcheted up again to
£42bn on Wednesday.
With growth also slowing dramatically, spending is going to be
very tight. At the same time, Mr Darling has very little immediate hope
of easing the pressure on homeowners after the Bank of England left
interest rates unchanged yesterday.
Drivers of gas-guzzling vehicles are facing another rise in road tax, it emerged today.
Alistair Darling is expected to use next week's Budget to lower taxes for greener vehicles and punish high-polluting cars.
Last year's financial statement saw vehicle excise duty for Band
G vehicles rise from £300 to £400 a year, coming into effect next
month, and London 4x4 owners are also about to be hit by a £25-a-day
congestion charge.
The Chancellor is now planning to ratchet up the tax further.
He is also predicted to reward owners of low-emission vehicles. The
road tax for Band B cars was reduced last year from £40 to £35.
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