By Claire West

Government must deliver on its manifesto pledge for a fuel duty stabiliser as record high fuel duty rates put small businesses on knife-edge, the Federation of Small Businesses (FSB) said today.

As the increase in VAT to 20 per cent hit on 4 January, fuel duty also rose to a record high putting further pressure onto already hard-hit small firms' cash-flow.

In opposition, the Conservative Party promised to put a fuel duty stabiliser - a mechanism to ensure an automatic freeze on fuel duty increases and a reduction in duty to match any increases in VAT revenues from higher pump prices - and the FSB is severely disappointed it has not delivered on this pledge.

The UK has the second highest diesel price in Europe, yet, on average a litre of diesel is made up of 51 per cent product price and 49 per cent tax, whereas in the UK the average is 38 per cent product price and 62 per cent tax.
In real terms, fuel duty will rise by one per cent above inflation each year from April 2011 to April 2014. So, the FSB is concerned small businesses will not be able to sustain such high prices.

The FSB calling for future fuel duty increases to be scrapped and for the promised fuel duty stabiliser to be put into action immediately.

The FSB is also concerned that the recent good news in the manufacturing sector could be hampered by the rise in fuel duty. This sector needs to remain competitive but fuel duty could prevent growth in this area.

John Walker, National Chairman, Federation of Small Businesses, said:

"The country's small businesses are not just hard-hit by the recent VAT rise, but also by record high fuel prices which has come at the most fragile of times. Small firms, such as the haulier and the taxi driver, will all be severely affected by this rise in fuel duty. Unlike big businesses, they will have to pass the cost onto customers at a time when they already have to deal with the VAT hike.

"In opposition, the Conservative Party promised to put a fuel duty stabiliser in place - something the FSB has been calling for. But they have failed to deliver. As such, they are placing strain on already hard-hit businesses cash-flow. It is imperative the Government acts now and introduces the stabiliser to avoid a relentless flow of fuel duty increases that simply put small firms on a knife-edge."