Cut fuel duty by 20p: calculation note

Central fiscal result

+£9.5bn - Net fiscal impact in 2027-28

Low case: +£7.0bn. High case: +£12.5bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Fuel duty falls by 20p per litre for petrol and diesel.
• The scenario follows Reform's 2024 Contract detail.
• No offsetting road-user charge is included.
• The policy is treated as permanent.

Affected population

• Affected units are motorists, hauliers and fuel-buying businesses.
• Higher-mileage households receive larger cash gains.
• Non-drivers receive no direct benefit.
• Fuel retailers and hauliers face pass-through decisions.

Gross impact

• 20p is a large share of current per-litre duty.
• HMRC ready-reckoners scale petrol and diesel effects separately.
• Central cost is £9.5bn including VAT effects.
• Higher consumption partly offsets lost duty.

Fiscal build-up, central case

• Fuel duty receipts lost: +£8.8bn
• VAT receipts lost: +£0.9bn
• Extra fuel-use offset: -£0.3bn
• Administration: +£0.1bn

Central net impact: +£9.5bn in 2027-28.

Behaviour and pass-through

• Low case assumes higher fuel use and stronger activity offset some loss.
• Central case assumes substantial pass-through into pump prices.
• High case assumes weaker offset and lower VAT receipts.
• Environmental damage cost is not fiscal-scored.

Phasing

• 2026-27: +£2.5bn. Preparation or partial implementation.
• 2027-28: +£9.5bn. Main scenario year.
• 2028-29: +£9.8bn. Behaviour and pass-through develop.
• 2029-30: +£10.2bn. Steady-state uncertainty persists.

Main source groups

• Ofgem, "Energy price cap explained" (2026): The April-June 2026 cap is £1,641 for a typical dual-fuel direct-debit household; scale check for energy-bill relief.
• Reform UK, "Our Contract with You" (2024): Reform pledges cheaper energy by scrapping net-zero policies, levies and taxes; defines policy direction but not details.
• HM Revenue and Customs, "Direct effects of illustrative tax changes" (2026): Used to support the baseline, affected-population sizing or behavioural assumptions in the illustrative scenario.
• Davis and Kilian, "Estimating the Effect of a Gasoline Tax on Carbon Emissions" (Journal of Applied Econometrics, 2011): A gasoline-tax increase was estimated to reduce vehicle carbon emissions, though not enough alone to meet climate targets; supports the direction that fuel-duty cuts increase driving and emissions.
• Andersson, "Carbon Taxes and CO2 Emissions: Sweden as a Case Study" (American Economic Journal: Economic Policy, 2019): Sweden’s carbon tax reduced transport emissions relative to a comparable synthetic-control group; relevant to the emissions and fuel-use risk of cheaper motoring.
• Reform UK, "Our Policies" (2026): Reform pledges cheaper energy by scrapping net-zero policies, levies and taxes; defines policy direction but not details.