'Cut Fuel Duty' If Price Stabiliser Fails, Says Forum

A small business support organisation is calling on the Government to cut fuel duty if its proposed 'fuel price stabiliser' proves too impractical to implement.

With the recent VAT increase and widespread predictions of permanently high oil prices, the Forum of Private Business is arguing that a straightforward reduction in duty would be the simplest way to tackle soaring prices at the pumps.

The Forum made the call in response to new comments from the Prime Minister, David Cameron, in which he signalled that the Government was again looking into the idea of a fuel price stabiliser.

The stabiliser would be a mechanism designed to reduce the tax on petrol and diesel as the price of oil rises, and visa versa, in order to keep fuel prices relatively constant.

The idea was originally proposed in the Conservative pre-election manifesto but appeared to have been dropped after the Chancellor, George Osborne, instructed the Office for Budget Responsibility (OBR) to look into it. According to reports, the OBR claimed that the stabiliser would be too impractical and costly to implement.

If the same conclusion is reached again, the Forum believes the Government should simply cut the duty it charges on fuel - reversing recent increases at the very least.

This, the Forum is arguing, would help secure economic recovery and help the millions of smaller businesses across the UK which are struggling with the current record prices on the forecourts.

Forum Chief Executive Phil Orford said: “The idea of the fuel price stabiliser was sold to the public quite heavily by the Conservatives before the election and we supported it from the outset.

“Both high and fluctuating fuel prices cause serious problems for smaller companies and their cashflows, so we would welcome any attempts to tackle the problem.

“The spiralling cost of unavoidable expenses like fuel and utilities are one of the main problems facing smaller businesses at the moment. Our recent ‘Economy Watch’ research found that, despite an upturn in sales and orders, SMEs are struggling to maintain their profitability because of these increased costs, so the issue is threatening economic recovery.”

Research carried out by the Forum in November found that many small businesses experienced a rise in orders and turnover towards the end of 2010.

Almost one in three (30%) members on the Forum’s ‘Economy Watch’ panel saw increases in their order books and turnovers, with only 16% reporting a decrease.

Business for the remaining 54% stayed steady between the Forum’s previous survey in mid October and the late November study.

However, many business owners on the panel also reported a sharp drop in profitability during the same period as increases in fuel costs, energy prices and raw materials hit home.

At 46%, almost half of the firms surveyed said they had seen a recent increase in the cost of doing business, with only 1% reporting that costs had fallen.

As a result, 27% of Economy Watch panel members reported a decrease in profitability since they were last surveyed in October, compared to just 14% who reported an increase.

(BMcN/GK)