13.02.08 Fuelling inflation
Do you think scrapping the 2p fuel duty increase will help cut inflation?
Inflation is currently running at the highest level since June last year, and rising fuel costs are to blame that's the conclusion of the latest report on inflation by the Office of National Statistics (ONS).
The two indicators of inflation, the Consumer Prices Index (CPI) and the Retail Price Index (RPI), both show an increase. CPI puts inflation at 2.2%, up from 2.1% in December, while RPI shows inflation rose from 4% to 4.1% over the same period. It's the fourth month in a row that inflation has exceeded the government's target of 2%
The report points the finger at a number of factors including food and drink prices, but says the largest upward pressure came from an increase in the price of road fuels. The national average price of unleaded rose 1.3p in January alone, taking it to a total of 103.9p per litre. This time last year a litre of petrol cost 87.5p.
High fuel prices drive inflation because fuel is a fundamental to the infrastructure of the UK. Our food and basic goods are transported using it, and if the price goes up, so does the price of our goods. A small amount of inflation is healthy for the economy, but too much and we start to run into problems - missed mortgage payments, repossessions and unemployment.
Worse still, the report's inflation figures don't take into account the impact that the energy price rises in January will have, because the current model assumes it will take up to 4 months for the price rises to take effect. The full effects of inflation may also have been dampened by a decrease in clothing costs and cut-price offers on the High Street, which effectively offsets the problem of high food and fuel. Economists are warning that this, combined with two further 2p increases in fuel duty planned for April and October, will mean inflation will hit 3% by the end of the year.
The freight industry sent a letter this week to the Chancellor, asking him to scrap the 2p a litre increase planned for April, and in a letter to the Daily Telegraph, 11 leading business figures argued that they were being hit simultaneously by a slow down in the economy and rising fuel costs.
It said: "At 50.35p a litre, UK fuel duty for diesel and petrol is already the highest in Europe. Indeed UK diesel duty is double the EU average rate of 25p a litre. The chancellor now plans to increase this by 2p per litre from 1 April.
"Such an increase will generate further serious difficulties for the transport and forecourt industries, business drivers, those dependent on the car, and for businesses or individuals in remote or rural areas with no alternative transport options."
Have you noticed an increase in living costs? Are you worried about the effect that further inflation rises will have on you? Do you think the Bank of England is capable of controlling inflation?
Your Comments
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Yes I feel it. Rent is going up, council tax and worst of all the money spent to make money (transport).
Incapacity benefit is begining to look more and more attractive.
If 2p increase,is not implemented,where is Darling going to get the extra
cash that is needed.Non-doms,no, you and i.The super rich,slip away again.
To enjoy there lavish lifestyles at our expense.
The Mayor of London's office has just confirmed changes to the city's congestion charge that will sting owners of cars emitting more than 225g/km of carbon dioxide to the tune of £25-a-day.
The new congestion charge will come into force on October 27 2008. It is described by the London authority as "the world's most ambitious scheme to reduce the contribution of urban traffic to greenhouse gasses", and "a key part of the Mayor's Climate Change Action Plan which aims to reduce London's CO2 emissions by 60 per cent by 2025."
Although suggestions had been made to the contrary, Mayor Ken Livingstone has been true to his word and will provide a 100 per cent discount to the charge for cars than emit less than 120g/km of CO2, and are EuroIV-emissions compliant. That means owners of the likes of the Mini Cooper D, VW Polo Bluemotion and Ford Fiesta TDCi, as well, as those of the Toyota Prius and Smart Fortwo, will be able to drive through London for free.
According to TfL statistics, 17 per cent of the cars that currently enter the charging zone are in VED tax band G, and will qualify for the £25 charge. Just 2 per cent using the zone are in tax bands A and B, and will therefore go free - but that figure is sure to rise once the changes come into effect.
If you drive a car registered before September 2001 with an engine bigger than 3000cc, you'll also be subject to £25-a-day. Rather arbitrarily, that means if you drive a W-reg BMW M Coupe (which is a low, four-meter car, and therefore not a big contributor to congestion) you'll have to pay £25-a-day, but a diesel-engined Range Rover of the same age would get in for just £8.
In justifying the change, Livingstone said: "nobody needs to damage the environment by driving a gas guzzling Chelsea Tractor in central London. The CO2 charge will encourage people to switch to cleaner vehicles, or public transport."
"Those who choose to carry on driving the most polluting vehicles will help to pay for the environmental damage they cause. This is the "polluter pays" principal."
THIS REPORT FINALY PROVES THAT THE FUEL DUTY HAS 0 TO DO WITH HELPING THE ENVIRONMENT. YOU STILL WONDER WHY INFLATION IS GOING UP?
Don't worry while you moan and do nothing about things more of this is on its way.