PolicyLens

Methodology note

Cancel the 5p fuel-duty rise: calculation note

Scenario assumptions behind the Cancel the 5p fuel-duty rise estimate. The figures are illustrative and exclude unrelated Conservative pledges.

View main policy page: Cancel the 5p fuel-duty rise

Central fiscal result

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

Low case: +GBP 1.8bn. High case: +GBP 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 GBP 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: +GBP 2.8bn
  • Higher VAT and activity receipts: -GBP 0.1bn
  • Administration effects: GBP 0.0bn
  • Environmental externality: GBP 0.0bn

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

Main source groups

  • con-plan-2026: Conservative live policy page; used to identify current pledge wording.
  • obr-efo-oct-2024: OBR October 2024 forecast; fuel-duty, energy and oil-gas receipts.
  • hmrc-ready-2025: HMRC tax ready reckoners; main tax-cost anchor.
  • obr-efo-mar-2026: OBR March 2026 forecast; fiscal and macro baseline.
  • davis-kilian-2011: Fuel taxes and emissions; informs behavioural and incidence assumptions.
  • andersson-2019: Carbon tax evidence; informs behavioural and incidence assumptions.