Conservative - Motoring tax
Cancel the 5p fuel-duty rise
Keep the temporary 5p fuel-duty cut rather than allowing the scheduled rise to take effect.
Last updated: May 2026.
Duty baseline
The scenario maintains the temporary 5p fuel-duty cut. The OBR has repeatedly treated reversal of temporary freezes and cuts as a scheduled receipts increase in the forecast baseline.
- Drivers gain lower pump prices.
- Receipts fall versus forecast baseline.
- Emissions and congestion costs remain underpriced.
Core trade-offs
Drivers and road-haulage users gain from lower fuel costs. The Exchequer loses receipts, while cheaper fuel encourages driving and weakens emissions incentives.
- Motorists gain a visible tax cut.
- Treasury loses fuel-duty receipts.
- Environmental externalities rise.
Fiscal impact by 2028-29
+GBP 1.8bn to +GBP 3.8bn. Central estimate: +GBP 2.7bn.
- Positive numbers mean net fiscal cost; negative numbers mean Exchequer savings.
- Main cost is lower fuel-duty receipts.
- Lower transport costs recover small receipts.
- The policy weakens emissions incentives.
- This is not an official costing.
Economic impact by 2028-29
- Jobs: Road-intensive firms benefit modestly; little aggregate jobs effect.
- Wages: Real income rises for drivers; no underlying wage change.
- Prices: Fuel prices lower; some delivery costs may fall if passed through.
- GDP / productivity: Small short-run boost, but congestion and emissions costs are negative.
Assessment
Keeping the 5p cut is a straightforward tax cut for drivers. The fiscal cost is material, and the policy is weakly targeted because cash gains rise with fuel consumption.
Confidence: Medium. Fuel-duty baselines are strong; behavioural fuel use and pass-through are modest uncertainties.
Main risks
- Revenue loss: Fuel duty is a large, declining but still important tax base.
- Emissions: Cheaper fuel raises emissions relative to the baseline.
- Distribution: Benefits depend on mileage and vehicle use, not household need.
Safeguards
- Show distribution by income and rurality.
- Pair with road-pricing transition work.
- Keep emissions effects explicit.
Academic evidence
Davis and Kilian, Journal of Applied Econometrics, 2011
Fuel taxes and emissions
Higher gasoline taxes reduce fuel use and carbon emissions, though distributional effects matter.
Relevant to cancelling fuel-duty rises.
Estimating the Effect of a Gasoline Tax on Carbon Emissions (2011)
Andersson, American Economic Journal: Economic Policy, 2019
Carbon tax evidence
Sweden's carbon tax reduced emissions while measured GDP effects were limited in that setting.
Relevant to scrapping carbon taxes and fuel duties.
Carbon Taxes and CO2 Emissions: Sweden as a Case Study (2019)
UK government evidence
Office for Budget Responsibility, 2024
OBR October 2024 forecast
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, 2025
HMRC tax ready reckoner
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, 2026
OBR fiscal forecast
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.
Sources
- PolicyLens methodology: Cancel the 5p fuel-duty rise Internal - PolicyLens, 2026
- Economic and fiscal outlook: October 2024 Fiscal forecast - Office for Budget Responsibility, 2024
- Direct effects of illustrative tax changes bulletin UK government statistics - HM Revenue and Customs, 2025
- Economic and fiscal outlook: March 2026 Fiscal forecast - Office for Budget Responsibility, 2026
- Estimating the Effect of a Gasoline Tax on Carbon Emissions Academic article - Davis and Kilian, Journal of Applied Econometrics, 2011
- Carbon Taxes and CO2 Emissions: Sweden as a Case Study Academic article - Andersson, American Economic Journal: Economic Policy, 2019
- Our Plan for Britain Party policy source - Conservative Party, 2026
Other Conservative policies
PolicyLens estimates are illustrative and should not be treated as official costings.