Motorists face petrol duty rise in budget

LONDON (Reuters) - Motorists could soon face the second hike in petrol duty since December after three years when the levy was frozen in response to high world oil prices and protests from the powerful transport lobby.

Chancellor Gordon Brown raised fuel duty by 1.25 pence per litre in his December pre-budget report, ending the freeze that first came into effect on October 1, 2003.

And with political parties of all hues now vying for the initiative on the environment, Brown is widely expected to raise petrol duty in line with inflation in his 11th and almost certainly last budget next week.

The Chancellor, the front runner to succeed Prime Minister Tony Blair in the summer, can cite the easing in world energy prices and environmental concerns to justify the rise.

Not freezing duty would save the government an annual 600 to 700 million pounds.

"Brown may take the opportunity to strengthen his credentials as a would-be 'green' Prime Minster," said Jonathan Loynes, an economist at Capital Economics.

"One straightforward option would be to raise fuel duties, which have been largely frozen since the abandonment of the fuel duty escalator."

However, Brown looks unlikely to restore the escalator, which imposed automatic above-inflation rises every year and was first introduced by the then-Conservative government in 1993.

That would probably provoke too much public anger as fuel taxes in Britain are already among the highest in Europe and Brown, whose Labour party is trailing the Conservatives in the polls, will want to avoid the crippling protests seen in 2000.