Cancel the 5p fuel-duty rise: calculation note

Central fiscal result

+£2.7bn - Net fiscal impact in 2028-29

Low case: +£1.8bn. High case: +£3.8bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Model continued 5p fuel-duty cut in 2028-29.
• Central cost is £2.7bn against forecast baseline.
• Baseline assumes scheduled reversal of temporary support.
• No new road-pricing replacement is included.

Affected population

• Affected population is fuel purchasers, households and businesses.
• Direct gains rise with mileage and fuel use.
• Indirect exposure includes haulage, taxis and rural drivers.
• Electric-vehicle users gain little directly.

Gross impact

• Central cost uses OBR scheduled-reversal receipts scale.
• Behavioural fuel-use response adds small revenue effects.
• High case assumes higher fuel volumes and prices.
• No congestion or emissions cost is fiscally monetised.

Fiscal build-up, central case

• Lost fuel-duty receipts: +£2.8bn
• Higher VAT and activity receipts: -£0.1bn
• Administration effects: £0.0bn
• Environmental externality: £0.0bn

Central net impact: +£2.7bn in 2028-29.

Behaviour and pass-through

• Low case assumes lower fuel volumes and some offsetting activity.
• Central case follows OBR-scale scheduled-reversal cost.
• High case assumes higher fuel use and weaker offsets.
• Demand response to 5p is modest but not zero.
• Distributional gains are broad and mileage-linked.

Phasing

• 2026-27: +£1.4bn. Preparation or partial implementation.
• 2027-28: +£2.6bn. Main ramp-up year.
• 2028-29: +£2.7bn. Target-year central estimate.
• 2029-30: +£2.7bn. Continuation at steady-state assumptions.

Main source groups

• Office for Budget Responsibility, "Economic and fiscal outlook: October 2024" (2024): The OBR scores fuel-duty, EPL and environmental-receipts measures and discusses oil-and-gas uncertainty; anchors energy and motoring estimates.
• HM Revenue and Customs, "Direct effects of illustrative tax changes bulletin" (2025): HMRC provides direct-effect estimates for illustrative changes to SDLT, VAT, fuel duties and other taxes; anchors tax costs before behavioural and macro adjustments.
• Office for Budget Responsibility, "Economic and fiscal outlook: March 2026" (2026): The OBR forecast sets the macro, borrowing and receipts baseline used for broad fiscal context; prevents treating tax cuts or spending changes as self-financing.
• Davis and Kilian, "Estimating the Effect of a Gasoline Tax on Carbon Emissions" (Journal of Applied Econometrics, 2011): Higher gasoline taxes reduce fuel use and carbon emissions, though distributional effects matter; relevant to cancelling fuel-duty rises.
• Andersson, "Carbon Taxes and CO2 Emissions: Sweden as a Case Study" (American Economic Journal: Economic Policy, 2019): Sweden's carbon tax reduced emissions while measured GDP effects were limited in that setting; relevant to scrapping carbon taxes and fuel duties.
• Conservative Party, "Our Plan for Britain" (2026): Used to define the pledge wording, policy scope and implementation scenario being modelled.