24.11.08 Fuel prices to rise as motorist hit with 2p duty increase
A permanent 2p duty increase in fuel tax has been introduced in the pre-budget report, which despite being presented as revenue neutral, will mean that fuel prices will rise over the next year and beyond.
The move to increase fuel duty by 2p has been introduced to offset the rate cut in VAT from 17.5% to 15%. However, although the VAT holiday will last 13 months, the 2p duty rise is permanent.
When VAT returns to 17.5% motorists will still be paying the higher rate fuel tax of 52.35p per litre and the higher rate VAT, making tax 74% of the total cost of a litre of fuel, and instantly boosting the cost of fuel by 2p a litre.
If the Chancellor had instead announced scrapping duty and VAT, a litre of petrol would cost just 25p.
The changes are designed to be neutral, but calculations by PetrolPrices.com show that there will be a slight increase at the pumps of 0.4p a litre, or 20p per average 50 litre tank of unleaded when the changes come into effect on December 1st. The fact that fuel prices will increase at all is contrary to the message from the Chancellor that the changes will be revenue neutral.
Motorists and businesses will effectively be bearing the brunt of the costs involved with implementing changes to help the UK as it heads into a recession.
Fuel is taxed twice – a fixed duty and percentage VAT. The changes mean that the fuel duty will be 52.35p per litre and VAT will be 15% from the 1st December.
Do you think the Chancellor did the right thing? Is it fair to make motorists foot the bill for the cost of reducing VAT? Should we have VAT on fuel at all?








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stop moaning
My blood boils, Yet again! It isnt just the companies that feel the hike on fuel prices. As a domicillery carer, (and there are many) its worrying every time you start your day. We just start to settle after the last round, Ding ding round 2!! Care users NEED Domicillery carers, who inturn need to be able to get there.
CJ
Let's get a sense of proportion here - this is *less than half a penny* per litre so it's not as if motorists are funding tax cuts for the rest. I am a motorist in a rural area so I do a lot of miles and don't like price rises, but this is nothing.
In any case, fuel duty NEEDS to go up in the longer term to help reduce carbon emissions - otherwise we won't have much of a world to drive around...