The Forum of Private Business (FPB) has claimed David Cameron has failed to follow through on the concept of a fuel price stabiliser and should cut fuel duty if it is proving too difficult to implement.

David Cameron has recently signalled that the government is once again looking into the idea of implementing a mechanism that will keep fuel prices relatively constant – reducing the tax on petrol and diesel as the oil price rise and visa versa, but the FPB has reservations about its effectiveness.

FPB Chief Executive Phil Orford said high and fluctuating fuel prices cause “serious problems” for SMEs and their cash flows, and the situation needs to be addressed.

“Since gaining power, Mr Cameron's government has failed to follow through on the stabiliser concept. Instead, it has actually increased duty on fuel by going ahead with two rises inherited from the previous administration, and effectively implemented a further price hike this month with the 2.5 per cent increase in VAT.

"Obviously, smaller firms in the haulage and transport sectors are particularly badly hit by ever-increasing prices at the pumps but companies of all types ultimately suffer the inflationary knock-on effects, as costs are passed on and consumers have less disposable income to spend.

"The spiralling cost of unavoidable expenses like fuel and utilities are one of the main problems facing smaller businesses at the moment.”

As almost three quarters of the price paid at the pumps is tax, Orford said the government could easily help SMEs, and the general public, and reduce the average price of a litre of fuel “at a stroke” by cutting tax.

"If the fuel price stabiliser is again deemed to be unworkable, a significant reduction in duty - or perhaps a reclassification of the VAT rate on fuel - is desperately needed to help keep businesses moving. It is widely predicted that oil prices are only going to keep rising over the long term so perhaps there is little need for a stabiliser mechanism anyway,” Orford added.