Cut fuel duty by 20p: calculation note

Central fiscal result

+GBP 9.5bn - Net fiscal impact in 2027-28

Low case: +GBP 7.0bn. High case: +GBP 12.5bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Fuel duty falls by 20p per litre for petrol and diesel.
• The scenario follows Reform's 2024 Contract detail.
• No offsetting road-user charge is included.
• The policy is treated as permanent.

Affected population

• Affected units are motorists, hauliers and fuel-buying businesses.
• Higher-mileage households receive larger cash gains.
• Non-drivers receive no direct benefit.
• Fuel retailers and hauliers face pass-through decisions.

Gross impact

• 20p is a large share of current per-litre duty.
• HMRC ready-reckoners scale petrol and diesel effects separately.
• Central cost is GBP 9.5bn including VAT effects.
• Higher consumption partly offsets lost duty.

Fiscal build-up, central case

• Fuel duty receipts lost: +GBP 8.8bn
• VAT receipts lost: +GBP 0.9bn
• Extra fuel-use offset: -GBP 0.3bn
• Administration: +GBP 0.1bn

Central net impact: +GBP 9.5bn in 2027-28.

Behaviour and pass-through

• Low case assumes higher fuel use and stronger activity offset some loss.
• Central case assumes substantial pass-through into pump prices.
• High case assumes weaker offset and lower VAT receipts.
• Environmental damage cost is not fiscal-scored.

Phasing

• 2026-27: +GBP 2.5bn. Preparation or partial implementation.
• 2027-28: +GBP 9.5bn. Main scenario year.
• 2028-29: +GBP 9.8bn. Behaviour and pass-through develop.
• 2029-30: +GBP 10.2bn. Steady-state uncertainty persists.

Main source groups

• S1: Reform Contract specifies a 20p fuel-duty cut.
• S2: HMRC ready-reckoners provide petrol and diesel revenue anchors.
• S3: Fuel-tax and carbon-tax studies inform driving, emissions and price-response assumptions.
• S4: PolicyLens includes VAT loss as a cautious add-on.
• S5: No official Reform implementation date was found.