Fuel tax set to rise to 71p in every pound

10th March 2009

(Aldershot, UK) Fuel tax is set to rise by 2 pence per litre next month, despite UK Prime Minister Gordon Brown making a promise to the country 7 months ago that he would not raise fuel duty for a “full year.”

The fuel tax rise of 2 pence per litre means 71 pence in every £1 spent at the pumps will go directly to the Treasury.

At the height of soaring pump prices Brown made a promise during Prime Minister’s Questions on July 16th 2008 not to raise fuel duty for a year. View the video. (1.40m – 2.02m)

He stated: “In recognition of the problem people face with petrol, we are freezing duty on petrol for the full year.”

Brown broke this promise in December 2008 when he added 2 pence per litre to fuel duty to offset the reduction of VAT to 15% – a move which angered UK hauliers who are able to claim fuel VAT back, but not fuel duty.

He is set to break the promise for a second time on April 1st 2009 when fuel duty on unleaded and diesel will rise 1.84 pence per litre. Including the additional 15% VAT on top this will make the rise at the pumps around 2 pence per litre.

Retailers’ margins are normally around 2-3 pence per litre, making it very unlikely that they’ll be able to absorb this additional cost. See how a litre of fuel breaks down.

Fuel tax is calculated by adding a fixed duty of 52.35 pence per litre to the basic cost of fuel, and charging a 15% VAT on top. From April 1st 2009 the duty will rise to 54.19 pence per litre, and VAT will remain 15% until Dec 31st 2009.

Brendan McLoughlin, founder of PetrolPrices.com said: “It’s one thing to raise fuel tax when the country is already struggling to make ends meet, but it’s quite another to explicitly promise you won’t raise fuel duty and do it anyway, despite everyone who’s struggling.”

“Fuel prices are much lower than the peak prices of 2008 so this rise is likely to go through unnoticed. Once it’s through there’s almost no chance it will be reversed – and when fuel prices rise again and the ‘VAT holiday’ ends we’ll certainly feel it.”

The PetrolPrices.com blog has had in excess of 60 comments on the changes. You can view the full list of comments here:

http://http://www.petrolprices.com/blog/april-fuel-duty-rise-to-bring-fuel-tax-to-109.html

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