Roadside assistance costs could soar if George Osborne rises the Insurance Premium Tax (IPT) again in his 2016 Budget on March 16, breakdown cover firms have warned.
Last year, Chancellor Osborne raised IPT from six per cent to 9.5 per cent adding millions to insurance premiums but also £12 million onto the AA's costs for providing roadside assistance.
Osborne's last outing in the House of Commons for his Autumn Statement in November did provide some good news for motorists with a National Pothole Fund set-up, money to tackle Operation Stack, a freeze on fuel duty, as well as whiplash and personal injury claims cracked down on.
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But that's expected to change on March 16 with Osborne likely to raise taxes for motorists either through IPT or fuel duty to help balance the country's deficit.
Edmund King, AA president, has warned the Chancellor against targeting these areas. He said: "Any additional increase in IPT would simply discourage motorists from taking out any roadside assistance cover, exposing them to potentially crippling costs for emergency recovery in the event of a breakdown.
"The IPT hike from the last budget is a double-whammy that only affects drivers as it hits insurance and roadside assistance costs, particularly hurting those on low incomes; and young drivers, who pay the highest premiums."
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Fuel duty could hiked by up to 2p a litre despite latest figures revealing that the portion HM Treasury receives from pump price is at the highest for diesel in a decade and for petrol since 2009.
The Chancellor now takes 74 per cent of diesel and fuel duty, including petrol, totalled £27.4 billion in 2015. Steve Gooding, director of the RAC Foundation, said: "It is true motorists have benefitted recently from falling oil prices but the biggest driver of what we pay at the pumps is not OPEC or the big oil companies but the Chancellor.
"In the unlikely event fuel retailers wanted to give petrol and diesel away for free they couldn’t. Motorists would still pay 69.5p a litre on the forecourts: 57.95p in fuel duty and 11.6 p in VAT.
"With the price of oil forecast to stay low the Chancellor might now be tempted to look at increasing fuel duty. We hope he does not. The cost of transport is already the biggest household expense bar none and a significant cost for business too. Will raising duty really get us – individuals and the economy – where we need to be?"
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