Budget Special: Petrol up 3p in drive to cut back on car use

THE BUDGET AND YOU: MOTORING

Motoring organisations accused Kenneth Clarke of delivering a "hit and run" budget as they reacted angrily to a 3p-a-litre rise in petrol and diesel from 6pm last night, and a pounds 5 hike to pounds 145 in the cost of an annual car tax disc.

The road lobby's fury was compounded by news that a further 110 highway schemes are being shelved, representing half the Department of Transport's road-building programme. Projects affected include controversial plans to build a tunnel underneath the Neolithic stone circles at Stonehenge.

The RAC said motorists would have to pay an extra pounds 65 a year just to keep their cars on the road as result of the increase in road fuel taxes. "While the roads crumble under their wheels, motorists are paying yet higher levels of taxation."

A litre of unleaded four-star petrol goes up from 64.2p to 67.2p a litre, while diesel goes up from 61p to 64p a litre. But the price rises are not being passed on immediately at the pumps because companies have been stocking up on duty-paid fuel in what has become a cut-throat market. The supermarket chain Asda said it would hold petrol prices until the end of the weekend, while Shell promised to freeze prices until midnight tonight.

"We don't have any choice but to put our prices up," said a Shell spokeswoman. "There has been a wafer-thin difference between our prices and that of our competitors over the past 10 months, so there is no other option."

The rise in petrol prices came as little surprise as the Chancellor was already committed to raising road fuel duties by at least 5 per cent above the rate of inflation under proposals contained in Norman Lamont's last budget in March 1993.

But the AA said there was no transport, environmental or economic justification for any real increases in petrol duty. "Dramatic increases in fuel duty will not lead to a decrease in traffic - 82 per cent of Britain's 29 million drivers say they will still use their cars even if petrol prices double over the next 10 years."

Analysts also expected the further reductions in the road programme as transport again bore the brunt of spending cuts in the budget to make room for lower taxes. Last year a third of the road-building programme was scrapped.

But the move was attacked by the British Road Federation: "Britain will enter the millennium with a worn-out, overcrowded and under-funded road system, undermining the economy and damaging the environment," said Richard Diment, BRF's chief executive.

Freight groups gave a mixed reaction to the Budget. They calculated the diesel increase would mean a 38-tonne lorry paying an extra pounds 1,350 a year but they applauded the Chancellor's decision to freeze the cost of a lorry licence for the seventh year running.

Leasing groups greeted new tax arrangements on company cars - Britain's favourite perk. Under the Chancellor's proposals, the scale of charges for company cars will be increased by 13 per cent for petrol cars and by 15 per cent for diesel cars. The Inland Revenue said the increases were in line with changes to pump prices this year and would yield pounds 30m in 1997-98. Some 800,000 people with company-owned cars get free fuel for private motoring and will therefore be affected by the proposal.

"The Chancellor has continued to recognise how fundamental the car is to business practices in the UK and to companies offering cars as an employee benefit," said Steve Dunn, commercial director of vehicle management group Lease Plan.

The Society of Motor Vehicle Manufacturers and Traders said the measures announced in the Budget "offered some encouragement for the motor industry, especially in the use of alternative fuels and low-emission diesel trucks and buses".

But the manufacturers' organisation questioned Mr Clarke's continuing commitment to the use of the Private Finance Incentive to fund the roads programme, saying that it remained "sceptical" that the use of PFI would "deliver" a modern roads system.

Christopher Macgowan, chief executive of the Retail Motor Industry Federation, said that although the overall tone of the budget was responsible, the motorist would end up footing much of the bill.

"The Chancellor has once again taken advantage of the golden goose that today's motorist is one of the largest providers of tax revenue.

"This is not only bad for the motorist but the industry as well."