Cut fuel duty by 20p

Duty baseline

Reform's 2024 Contract specified a 20p fuel-duty cut. HMRC ready-reckoners imply that even small percentage changes in petrol and diesel duty have large annual revenue effects.

• Fuel duty is charged per litre.
• The model applies petrol and diesel together.
• VAT effects are included cautiously.

Core trade-offs

Drivers and hauliers gain from lower pump prices. The Exchequer loses revenue, carbon incentives weaken, and benefits skew toward higher-mileage households and firms.

• Motorists and hauliers gain directly.
• Treasury loses a durable tax stream.
• Road emissions and congestion incentives weaken.

Illustrative fiscal impact

+GBP 7.0bn to +GBP 12.5bn. Central estimate: +GBP 9.5bn.

• Positive numbers mean public-finance pressure; negative numbers mean Exchequer savings.
• 20p per litre is the main scale marker.
• Gross costs and receipt offsets are separated in methodology.
• Behaviour and pass-through widen the range.
• This is not an official costing.

Economic impact by 2027-28

• Jobs: Haulage and car-dependent work benefit; green transport jobs face weaker incentives.
• Wages: Real incomes rise for drivers, especially high-mileage households.
• Prices: Cuts transport costs, but pass-through into goods prices is uncertain.
• GDP / productivity: Small short-run demand boost; long-run congestion and emissions costs worsen.

Assessment

A 20p duty cut is straightforward for drivers but expensive for the Exchequer. It helps households and firms with high fuel use, but weakens carbon and congestion incentives and is poorly targeted at low-income non-drivers. The GDP effect is probably modest and not enough to self-finance the revenue loss.

Confidence: Medium. HMRC duty ready-reckoners give a strong scale anchor, though behaviour and oil-price conditions affect pass-through.

Main risks

• Poor targeting: Benefits skew toward households and firms using more fuel, not necessarily those most in need.
• Climate signal: A permanent cut weakens incentives to switch vehicles or reduce journeys.
• Fiscal persistence: Once reduced, fuel duty is politically difficult to restore.

Safeguards

• Time-limit the cut during price spikes.
• Publish distributional effects by income and region.
• Offset with road-user charging reform.

Academic evidence

UK government evidence

Sources

• PolicyLens illustrative scenario methodology: Cut fuel duty by 20p Internal - PolicyLens, 2026
• Energy price cap explained Regulator data - Ofgem, 2026
• Our Contract with You Party policy document - Reform UK, 2024
• Direct effects of illustrative tax changes Official tax data - HM Revenue and Customs, 2026
• Estimating the Effect of a Gasoline Tax on Carbon Emissions Academic article - Davis and Kilian, Journal of Applied Econometrics, 2011
• Carbon Taxes and CO2 Emissions: Sweden as a Case Study Academic article - Andersson, American Economic Journal: Economic Policy, 2019
• Our Policies Party policy source - Reform UK, 2026

Other Reform UK policies

• Raise income-tax thresholds
• Cut household energy taxes
• Cut stamp duty below GBP 750,000
• Raise inheritance-tax threshold to GBP 2m
• Cut corporation tax to 15%
• Raise VAT threshold to GBP 150,000
• Abolish IR35 rules
• Replace some high-street business rates