Fuel prices to rise as motorist hit with 2p duty increase

24th November 2008

(Aldershot, UK) 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 boost 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.

“The changes to fuel tax are smoke and mirrors, and ultimately bad for motorists. Fuel duty has been increased by the back door, meaning that whilst we’re on VAT holiday motorists might not notice a difference, but effectively drivers are footing the bill for tax cuts made elsewhere.”

~ Brendan McLoughlin, Founder, PetrolPrices.com.

The response on the PetrolPrices blog on this topic has been overwhelming so far – at 11.30am (25/11/08) there were 4000 comments left on the blog, and over 16,000 votes.

You can see the comments from PetrolPrices.com users, and up to date results of our latest poll here:

http://www.petrolprices.com/blog/fuel-prices-to-rise-as-motorist-hit-with-p-duty-increase-106.html

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Notes to editors

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Prices are updated each weekday between 11am and 12pm. Prices are collected the previous day using fuel card transactions in petrol stations to gather an average price for each station.

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Louise Doherty
Spokesperson

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