Ahead of Ed Davey’s conference speech, the Liberal Democrats launched their cost-of-transport campaign. With households facing higher costs from the conflict in Iran, the party wants an emergency three-month package: a 10p cut in fuel duty, cheaper rail and bus fares, and lower EV charging costs. The bill is around £2 billion, funded from the extra revenue higher fuel prices generate.
There is a clear case for helping people through a sudden shock. But a party that has long argued for tackling climate change should ask a bigger question: are fuel-duty cuts really the best way to help people in the long term?
Britain has a familiar pattern. Prices rise. Households feel it. Government makes fossil fuels cheaper. Billions are spent, the pressure eases, and a few months or years later we are back in the same place.
None of it changes the underlying vulnerability. We remain exposed to international oil markets, and transport costs feed straight into the cost of living. A fuel-duty cut provides relief. It doesn’t reduce our dependence on oil, the majority of which is imported.
Fuel-duty cuts are also poorly targeted. The more fuel you use, the more you save, so someone driving a large, inefficient SUV gains more than someone in a smaller family car. That is hard to square with directing scarce public money at the households who need it most.
The OBR estimates successive fuel-duty freezes cost the Treasury around £120 billion since 2010-11. That money could have gone into transport infrastructure, clean energy and the industries underpinning Britain’s future prosperity.
Measures designed around petrol and diesel also distract from a transition well under way. In August, battery electric vehicles took 30% of new car registrations, up almost a third year to date. That’s more than petrol and diesel cars combined. The system is changing now, and policy should help people take part rather than making it cheaper to stay dependent on fossil fuels.
If £2 billion is available, there are better uses for it. A targeted used-car offer could help households scrap a polluting older vehicle and move into a cleaner electric alternative. EVs are cheaper to run and produce no tailpipe emissions, so wider access cuts both exposure to oil-price shocks and air pollution.
If we answer every price shock by subsidising petrol and diesel, we lock ourselves into the cycle: crisis, higher prices, intervention, temporary relief, another crisis.
A genuinely liberal approach will help households become less vulnerable to forces they cannot control. Better public transport. Affordable EV charging. Access to cleaner, cheaper vehicles.
Nobody should underestimate the pressure of rising transport costs. For someone driving to work, caring for a relative or running a business, the price at the pump matters. But the answer cannot be to make fossil fuels cheaper every time the world price rises. The fastest route to lower transport costs is not subsidising our reliance on oil. It is making the alternatives affordable and accessible to everyone. There is a strong case for the rest of the package, but the fuel duty cut should be parked.
* Mark Hofman has been a Councillor on Watford Borough Council since 2012.