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Fuel Duty: Osborne Faces Call To Delay Hike

(c) Sky News 2012

The Chancellor is being challenged to use money saved from closing tax loopholes to fund a delay in next year's planned fuel duty hike.

Labour is pushing for the planned 3p hike to be postponed for a second time and will force a Commons vote next week.

The move will increase the pressure on George Osborne to take action on fuel in his Autumn Statement next month.

The Chancellor has already postponed the hike once but it is due to come into force in January. Labour wants a further delay to at least April.

Shadow chancellor Ed Balls insists "it cannot be right" to hit struggling families and businesses with another tax rise.

In a blog for PoliticsHome , he wrote: "I am clear that now is not the right time to hit the economy with another tax rise on small firms and people on low and middle incomes.

"The Government needs to act and clamp down on those avoiding paying their fair share of tax so that millions don't have to pay more.

"And I hope MPs (BSE: MPSLTD.BO - news) from other parties will join us next week in pushing them to do so."

He suggested the money could come from clamping down on tax avoidance, citing one example of employment agencies using a loophole to lower their liability.

Mr Balls said they categorised part of a worker's pay as expenses, which means they pay less tax and national insurance and have higher profit margins.

"HM Revenue and Customs has forecast that these schemes cost the exchequer £650m a year. Recent estimates have now put it as high as £1bn a year," he wrote.

Scrapping the rise in August cost the Treasury £500m and it is estimated the further delay will cost another £350m.

However, campaigners from FairFuelUK claim allowing it to go ahead in January could lead to 35,000 job losses and hit economic growth.