What are we to make of the most recent pronouncement on fuel duty?

March brings a Budget, then Autumn brings more of the same – and that seems to be a good description. When it comes to fuel duty, it hardly matters matter whose hand is on the red box, the news is never exciting. A cynic might suggest that a Chancellor regularly announces a future increase purely in order to dress up a subsequent cancellation as a good thing.

The facts, at first glance, look good. Duty on unleaded petrol and diesel is still at 57.95 pence per litre, unchanged since 2011, while general inflation has been 14.5% over the same period. That has to be a good thing, surely?

It looks good, until you remember that any duty has to be viewed in context against the product price. In March of 2011, the overall price at the pump averaged at 132.2p per litre of unleaded; four years later, falling prices mean a pump price of 107.9p for the same litre. Fuel duty now accounts for 53.7% of the total price, compared with 43.8% four years earlier. The numbers are similar for diesel.

So, however much 11 Downing Street might want to position this as a kindly government offering a helping hand to beleaguered road users, the reality is a little different.

One of the first things that anyone studying GCSE Economics learns, ‘price elasticity of demand,’ is just a fancy way of saying something that we all know already. In simple terms, the less that is charged for something, the more that people will buy of it. So, as petrol and diesel prices drop, the more litres of fuel flow through the forecourt. With the duty per litre staying the same, more total fuel sold = more total duty collected.

Chancellor Osborne might innocently say that the level of fuel duty is being held to the 2011 level, and that would be true. He says it, however, in the cheerful expectation that HMRC will still be stashing away more tax overall. The only ‘good’ point is that any other Chancellor would probably do exactly the same thing – and Shadow Chancellor Balls certainly had nothing better to offer for road users.