Should we follow the French in petrol price cut?

Francois HollandeMichel Euler/AP/Press Association Images

The French are taking drastic action to keep prices at the pump from spiraling out of control. It was a key part of Francois Hollande's election promises, and he has come good, with the announcement that the country will spend €300 million keeping prices down.

So what is it doing, how will it work, and will the UK ever follow this example?


The French cut

The pressure to reduce fuel prices has come as a result of a huge increase in the wholesale cost of fuel across Europe. It means that in the UK the average two-car family is spending £10 a month more than it did at the beginning of the summer.

The cut in prices is coming as a combination of slashed profits for fuel companies, and a major cut in fuel duty. For three months the oil companies have agreed to cut three cents off the cost of a litre, and take the hit on their bottom line. Meanwhile, the state will cut three cents a litre off fuel duty, losing €300 million in duty as a result. It means an overall cut of six cents a litre.

After the initial temporary cut, the finance minister said there would be a permanent mechanism in place to keep prices more affordable for the long term.

This cut comes despite the pressure the French government is under to reduce its deficit. The ministers have simply calculated that unless prices are affordable, people simply won't drive, which will reduce the amount of fuel duty it receives anyway. The cut will encourage people back on the roads, and hopefully boost the economy.

In the UK?

So will the UK government see the light and follow suit?

Surely this should at least be on the table. It's already cheaper to fill your car up in mainland Europe than it is in the UK, especially if you drive a diesel. According to AA, at present, a typical 50-litre unleaded petrol fill-up costs about £2.10 less than in the UK and, thanks to lower tax, £10.50 less for a similar fill of diesel. It's hard to justify this massive burden at a time when we're all struggling to make ends meet.

However, this sort of policy change seems hugely unlikely. The government is still committed to regular rises in fuel duty, and we consider it a major victory when George Osborne axes a rise in duty. When the 3p rise this August was put off indefinitely there was talk of a 'huge relief' and motorists being 'better off' - when in fact all that had happened was that petrol stayed just as expensive as it had ever been.

Osborne said when he announced the freeze, that: "This Government has done more to support to motorists than any other. We cut fuel duty last year, and avoided two year's worth of rises planned by the previous Government. This comes on top of freezing council tax and putting money back in millions of taxpayers' pockets through raising the personal allowance. Today's decision is the right action to help, families, businesses and the broader economy."

No cuts

The idea of Osborne cutting duty is in the realms of our wildest dreams. It's just too easy a revenue generator for a cash-strapped government to let go of it. As a result we are leaving the roads in droves. According to Green Flag around 41% of us are making fewer car journeys.

There will be those who see this as a victory, highlighting the reduction in pollution as we all look for alternatives to driving. However, there will be those highlighting that a nation stuck at home is unlikely to be either working or spending their way out of recession.

But what do you think? Do you support a high-tax policy which is already encouraging people out of their cars, or is it time for the government to learn from the French and cut the cost of fuel? Let us know in the comments.

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