By ROB HULL, MOTORING EDITOR
Motorists are paying more to fill up their cars than they have done since March, as pump prices have risen to a seven-month high.
It comes just a week before the Autumn Budget, amid the threat that Rachel Reeves could deliver another financial blow to drivers by increasing fuel duty.
The average UK price of petrol now stands at 136.2p a litre, having last been at this level on 20 March.
Diesel is up to 144.6p per litre - the highest it has been since 17 March.
The AA says forecourt pricing is now on the 'knife edge' of returning to pre-covid record levels, with the only factor preventing this being the 5p-a-litre fuel duty cut that the Chancellor could axe in her Budget statement next Wednesday.
The temporary cut was introduced in March 2022 by then-Chancellor Rishi Sunak in a bid to temper skyrocketing pump prices following the outbreak of the Ukraine War.
The cut, which is worth 6p a litre when inclusive of VAT, was then extended by Reeves for another 12 months last autumn.
Removing this fuel duty cut would push the average price of petrol to 142.2p a litre and 150.6p for diesel.
Before Russia's invasion of Ukraine, the historical records for average UK pump prices stood at 142.5 a litre for petrol on 16 April 2012 and 147.9p a litre for diesel on 12 April 2012.
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The AA says forecourt pricing is on the 'knife edge' of returning to pre-Covid record levels if the Chancellor is to axe the 5p-a-litre 'temporary' fuel duty cut in next week's Autumn Budget
His Majesty's Revenue & Customs statistics show that, in the three financial years since covid, fuel duty receipts have fallen by £899million.
This is a result of people covering lower average mileage as hybrid working has seen fewer commuter journeys.
The accelerating transition to electric vehicles has also hit Treasury coffers - and is why the Chancellor is widely expected to announce pay-per-mile taxation for EVs from 2028 in her statement in a week's time.
And the 5p fuel duty cut is also restricting motoring taxation revenues for the Government.
However, the AA says tax receipts from petrol are not only robust but increasing.
In contrast, it is the loss in diesel taxation, down £1.25billion in the same three-year period, that's stinging most.
It says this is reflective of the economic downturn, with HGV traffic dropping by 2 per cent since 2023 as Britons tighten their purse strings.
With the 'temporary' 5p fuel duty cut seen as an easy target, Reeves is under increasing pressure to axe it.
There is also the concern that the Chancellor could go a step further by abolishing the 15-year freeze on the duty, which has been unchanged at 57.95p (52.95p inclusive of the temporary 5p cut) since 2011.
This is especially the case after Reeves opted to extend the 5p-a-litre cut in her previous Autumn Budget, despite calls from campaigners and some economists to hike the tax.
The AA says that it is a major loss in diesel taxation - down £1.25bn in the three years since the pandemic due to fewer haulage miles - that's stinging the Treasury most
The average UK price of petrol now stands at 136.2p a litre while diesel is up to 144.6p. This is the highest it has been since the middle of March
Motorists will be concerned that Rachel Reeves could not only terminate the 5p-a-litre fuel duty cut in next week's Autumn Budget but also end the 15-year freeze on the tax
Last month, motorists were warned their annual household bills will rise by £100 if the Chancellor does allow the cut to expire as part of her broader plan to plug the Government's £51billion fiscal black hole in the Autumn Budget.
According to the Road Haulage Association, this £100 rise will be a combined outcome of higher pump prices and increase distribution costs for road freight operators, which will push up the price of food and energy.
This would trigger a £7.3billion jump in household living costs between now and 2029, it warned.
But the AA says that a loss in fuel duty is being countered by inflation on motoring consumer spending, which it says has generated a huge windfall in VAT for the Treasury.
In full years 2023 and 2024 alone, the Chancellor collected an extra £1.23billion from VAT on consumer motoring spending, it said.
In 2024, compared to 2019, it hauled in nearly £3billion more in VAT from consumer road-users.
'At nearly £25billion a year, the huge VAT haul from consumer spending on motoring is a 'hidden' tax on driving that now matches what the Government gets from fuel duty on petrol and diesel,' says Jack Cousens, the AA's head of roads policy.
'The recent increase in pump prices has put the national averages for petrol and diesel on a knife-edge that could see them return to the record levels of pre-covid if the 5p fuel duty cut, introduced in March 2022, is cancelled in this month's Budget.'
Experts have warned the Chancellor that culling the 5p fuel duty cut would increase average household bills by £100 a year due to the combined impact of higher pump prices and a rise in food and energy pricing as a result of increased costs for haulage operators
The Petrol Retailers Association has in recent weeks urged the Chancellor to both freeze fuel duty and permanently retain the 5p-per-litre rebate on the back of inflation remaining at 3.8 per cent - almost double that of the Government's 2 per cent target.
Gordon Balmer, executive director of the PRA, said: 'Forecourts are doing all they can to keep prices as low as possible, despite economic pressures.
'With inflation putting pressure on business, the last thing we need is a rise in fuel duty. We urge the Chancellor to commit to a full freeze on fuel duty and make the 5p-per-litre rebate permanent in the upcoming Budget.'
An HM Treasury spokesperson told the Daily Mail and This is Money: 'The Chancellor has been clear that at Budget she will strike the right balance between making sure that we have enough money to fund our public services, whilst also ensuring that we can bring growth and investment to businesses.'
They added: 'The Chancellor decides tax policy at fiscal events.
'We do not comment on speculation around changes to tax outside of fiscal events.'
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