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Road Fuels Consultation and Impact Assessment

Volume 743: debated on Tuesday 16 January 2024

I would like to update the House on the Government’s road fuels consultation and impact assessment that will be published today and closes on 12 March 2024. The Government are committed to reducing bills for families, including to ensure drivers get a fair deal at the pump. The proposals in the consultation will help with this by facilitating a competitive road fuels retail market, increasing price transparency and protecting consumer interests.

The UK is a nation of drivers. There are 41.2 million vehicles on the road in the UK today. For many people, vehicles are a critical part of everyday life, connecting countless communities and businesses up and down the country—whether that is getting to work or taking children to school, or for those living in rural areas.

The Government have already taken action to support drivers. At spring Budget 2023, the Government announced their continued support for households and businesses by maintaining the rates of fuel duty at the levels set on 23 March 2022 for an additional 12 months, by extending the temporary 5p fuel duty cut and cancelling the planned inflation increase for 2023-24. That represents an overall saving for drivers of around £10 billion over the two years from the 5p cut being introduced, and around £200 for the average car driver. From 2011-2022, the average driver made a cumulative saving of £1,900 from the freezing of fuel duty rates, compared with what would have been paid under the pre-2010 escalator.

When fuel prices are high the impacts are felt by everyone. That is why the Government were very concerned with the findings of the Competition and Markets Authority’s road fuel market study published in July 2023. The CMA found that competition between fuel retailers at a national level had weakened since 2019, due to a decision by the historic price leaders to take a less aggressive approach to pricing by significantly increasing their internal margins for fuel. This was coupled with other retailers maintaining largely passive pricing policies rather than trying to win market share.

As a result, consumers were paying generally higher prices than would otherwise have been the case. Among the four largest supermarkets, the higher margins resulted in a combined additional cost of £900 million for consumers in 2022 alone.

The study also found that long-standing patterns of variation in pricing between different local areas remain across the UK, meaning that consumers in some areas can pay significantly more for fuel than those in others. Drivers are also paying significantly more to fill up at a motorway service station than they would elsewhere. In 2022, motorway retailers were on average charging around 20p per litre more for petrol and 15p per litre more for diesel than retailers elsewhere.

We are determined to ensure that consumers get a fair deal at the pump. It is crucial that we strengthen competition so that the market works for consumers. The Government have acted swiftly to address this and committed to introduce a statutory open data scheme and an ongoing road fuels price monitoring function. These measures will empower consumers to find the best price for fuel, igniting competition among fuel retailers for their business.

The open data scheme will increase price transparency for consumers, allowing them to compare prices more easily. It will grow our digital economy, creating opportunities for third-party app and website developers to use the data in innovative ways. This will end the need to drive around to find cheaper fuel, instead enabling live price data to be displayed on in-car displays, apps and price comparison sites.

The monitoring function will provide the Government with an assessment of competition in the market, acting as a deterrent against individual businesses taking actions that may weaken competition and holding industry to account. The Government recently announced that the CMA will undertake the monitoring function and amended the Digital Markets, Competition and Consumers Bill to provide the CMA with the necessary information-gathering powers.

We want to hear from everyone to ensure that the two recommendations work effectively to facilitate a competitive market, deliver on price transparency and protect consumer interests. We will closely assess all the responses, which will inform the design of the open data scheme and some aspects of the monitoring function that are not covered in the amended Digital Markets, Competition and Consumers Bill. The measures will improve competition for the benefit of consumers and get a better deal for drivers across the United Kingdom.

I am placing copies of the consultation and the impact assessment in the Libraries of the House.