Drop in fuel prices 'provided economic boost'

Lower fuel prices have provided a "considerable boost" to the UK economy, according to an economic consultancy.

The cut in the cost of filling up has raised GDP by 0.5-0.6%, the Centre for Economics and Business Research (CEBR) found.

It reported that savings for households and businesses have "filtered through into the economy" with lower prices for some goods, increased consumption and greater investment.

The CEBR estimated that this would directly lead to the creation of around 121,000 jobs.

It also concluded that continuing the fuel duty escalator - which has been frozen since 2011 - would have been "an unwise policy" because it would have reduced job creation and stifled economic activity.

The report stated: "Our previous analysis has shown the savings that falling fuel prices have brought to consumers and businesses.

"Here we extend this analysis to show that falling oil and fuel prices have provided a considerable boost to the UK economy over the past year."

Quentin Willson, campaigner for FairFuelUK, which commissioned the report, called on Chancellor George Osborne to encourage further cuts to fuel prices in next week's Spending Review.

He said: "This landmark report completely destroys the myth that high fuel duty levels increases Government tax receipts.

"We've proved that keeping duty low actually increases revenues into the Exchequer by improved economic activity, more income tax, national insurance, corporation tax and VAT.

"The Government must now do everything in its power to lower fuel duty as well as making sure fuel retailers pass on oil price savings to businesses and consumers.

"Our future economic strength depends on this policy."

The average price of unleaded at the end of October was 107.8p per litre while diesel was 110p, according to the RAC Fuel Watch.

Lower fuel prices are being driven by the oil price, which remains below 50 US dollars (£32.90) a barrel.