First the tax, then the discounts. How Meloni managed to make people forget the dangerous trap of excise duties

The phase of excise duty cuts on diesel came to an end yesterday, at least for the time being. At a time of rising interest rates, public finances under strain and teetering on the 3 per cent deficit threshold, with an energy crisis and an election campaign looming, the government’s fuel discount policy could have become a trap: on the one hand, continuing with it meant draining resources from a budget already running on empty; on the other, halting it altogether would have meant raising fuel prices just as inflation is on the rise. A dilemma that was difficult to resolve. The Meloni government, however, has managed to extricate itself painlessly from the trap into which it had fallen.

The first step in the strategy was the dramatic announcement on 16 September, when Giorgia Meloni revealed the exemption – currently limited to 2027 – from road tax on the ‘first car’. A major political communication campaign. Because, in reality, at that very same Cabinet meeting, the government had decided to gradually reduce the discount on diesel excise duty (including the corresponding VAT effect) from 17 cents per litre to 12.2 cents from 18 to 25 September and finally to 6.1 cents per litre from 26 September to 5 October: a cut of 5 cents each week until it reached zero. But the simultaneous announcement of the suspension of the vehicle tax completely shifted the focus of the debate: so whilst the government was immediately raising the price of diesel, public opinion focused exclusively on the cut in vehicle tax that was due to take effect the following year.

From an accounting perspective, too, the measure has been beneficial. Compared with the excise duty cut, the road tax exemption costs less (2.4 billion in one year compared with 2.2 billion spent in six months) and offers certain improvements, both environmentally and fiscally. The government has moved from a measure which, by reducing the cost of fuel, acted as an incentive to consumption, to a measure that leaves money in car owners’ pockets without distorting the price signal. In this sense, the road tax exemption is not only better for the environment (precisely because it does not subsidise consumption) but also redistributes resources in a more progressive manner, as it excludes owners of more powerful cars and does not multiply the benefit for those who own multiple vehicles. From Meloni’s and the centre-right’s perspective, however, the significant advantage of the new measure is that it allows them to send a clear political message to their electorate: ‘Whilst others talk about wealth taxes, we are scrapping a tax on property’.

Meanwhile, as the excise duty cut was gradually phased out, the government put pressure on oil companies (over which the sword of Damocles in the form of the windfall tax still hangs) to absorb the rise in fuel costs. The first move came from Eni, the state-controlled company, which announced that from 28 September it would impose a price cap on fuel at its Enilive stations of 2.19 euros per litre for diesel and 1.99 for petrol (around 17 cents less – coincidentally, the exact amount of the excise duty cut). Eni’s move was followed – partly due to the government’s ‘persuasion’ – by other major vertically integrated operators such as IP, Esso, Tamoil and Q8: together, they account for over half of the petrol stations nationwide. The average price of petrol and diesel across the country has thus fallen by more than 10 cents.

Consequently, the government – which had previously left the possibility open – has now decided not to activate the variable excise duty, preferring instead to shore up the budget, which forecasts a deficit of 2.9 per cent for 2026, at a time when the cost of debt is rising. Meloni’s gamble is that in the coming months the market price of fuel should fall, on the one hand because the flow from the Strait of Hormuz has resumed as normal (albeit with higher insurance costs) and, on the other, because the G7 has announced the release of strategic reserves of oil and petrol. Ultimately, the Italian government has spent around 2.5 billion on the energy shock caused by the war in Iran. This is well below the European average. Spain, for example, is now entering an election campaign following an increase in the subsidy on diesel and petrol to 20 cents per litre: in total, for the three energy aid packages approved this year, Sánchez’s government has spent 12 billion euros. This is an unsustainable sum for Italy’s public finances.