Rishi Sunak ‘is set to axe the freeze on fuel duty in upcoming budget but has ruled out bringing in a mansion tax’
- Chancellor Rishi Sunak under intense pressure to maintain the fuel duty freeze
- Conservative backbenchers have warned a rise in tax would alienate voters
- Mr Sunak signalled wants to break cycle of freezing fuel and beer duty each year
Rishi Sunak is set to signal the end of the decade-long freeze on fuel duty in next week’s Budget – but has ruled out a so-called mansion tax, Tory sources revealed last night.
The new Chancellor is under intense pressure to maintain the fuel duty freeze, with Tory backbenchers warning a rise in tax would alienate voters.
But, in meetings with Tory MPs this week, Mr Sunak has signalled that he wants to use the Government’s big majority to break the cycle of freezing fuel and beer duty every year. One MP said: ‘There was a lot of concern about fuel duty but his response was not encouraging at all.
‘He said keeping the freeze on fuel and beer duty would cost him £1.3billion this year and set a precedent for the rest of the parliament which the Government could not afford if it wants to pay for its priorities.’
Rishi Sunak (pictured) is set to signal the end of the decade-long freeze on fuel duty in next week’s Budget
Treasury sources played down the prospect of an immediate rise in fuel duty next week, but acknowledged that the Chancellor could use his statement to signal that the freeze will not go on indefinitely.
The need to meet climate change targets is likely to be used as cover for duty rises.
As a first step, Mr Sunak will slash subsidies for the ‘red diesel’ used by off-road vehicles. The subsidy, which costs the Treasury £2.4billion, will in future only be available for farm vehicles, with the construction industry expected to use normal diesel, which attracts five times as much duty.
Former minister Robert Halfon warned against any rise in fuel duty, saying the move would alienate ‘millions of people, who as Boris Johnson said, lent us their vote. It could be the shortest political loan in history.’
The Chancellor has ruled out introducing a mansion tax.
The idea of an annual levy on high-end homes was said to have been favoured by the PM’s chief adviser Dominic Cummings but was opposed by many Tory MPs and has now been dropped.
Treasury sources said Mr Sunak had been forced to scale back ambitions for the new Government’s first Budget because of economic uncertainty created by the coronavirus.
The new Chancellor (pictured) is under intense pressure to maintain the fuel duty freeze, with Tory backbenchers warning a rise in tax would alienate voters
The Chancellor will press ahead with a promised increase in the threshold for paying National Insurance, which will deliver a £100 tax cut for more than 30million workers.
And he will set out his philosophy for future Budgets. A source said that Mr Sunak was in favour of ‘simpler, fairer, flatter and lower taxes’, but acknowledged that he had little room for manoeuvre next week.
Mr Sunak is also expected to dramatically cut back entrepreneur’s relief following concerns that it is being used as a vehicle for tax evasion.
The move has prompted anger among some Tory MPs, who fear it will send the wrong signal to business. But Mr Sunak is said to believe there are more efficient ways to encourage entrepreneurs.
A Treasury source said: ‘The coronavirus is going to change the tone of the Budget and possibly also the content.
‘The essence of the Budget now is going to be the manifesto pledges – delivering on the promise to cut national insurance and delivering on infrastructure. Other things will have to wait.’
Mr Sunak will deliver his first Budget just three weeks after taking the job following the dramatic resignation of Sajid Javid last month.
Although his former role as Treasury chief secretary meant he was already immersed in decisions about spending, he has faced a race against time to get on top of proposals for tax changes.