May 30, 2008

The government has come under renewed pressure to reduce the amount of tax on UK fuel following the revelation that pre tax it’s the second cheapest in the EU. The pre tax cost of diesel is 48.6p a litre with unleaded petrol costing 41.2p per litre. Once tax is added Brits pay more at the pump than any other EU nation. With 68.8 pence going to the coffers of the Chancellor for every litre purchased.  Fuel contributes a larger proportion of it's cost to the UK tax man than any other EU nation.

That the Chancellor has been holding the proposed 2p per litre price increase on fuel duty over the heads of UK motorists, since it was postponed in March, is risible. Fuel prices have risen 6p per litre in the last month alone, three times the price of the proposed rise. Tax on the price of fuel also accounts for 53.65p per litre for unleaded and 56.94p per litre for diesel. The remaining money is accounted for by VAT. The reason that VAT adds such a large figure is that the VAT is added to the fuel and the tax on it. If the VAT was added to just the price of the fuel it would take the price of a litre of fuel down by around ten pence per litre, which would make UK motorists happier at the pumps.

The haulage industry would, however, not be helped by this reduction, as they can claim back the VAT on fuel as a business expense there have been call for the way that fuel is taxed to increase the amount of VAT and lower the amount of fuel tax in order to enable haulage firms to claim more of their costs back, but the government has, as yet, done nothing. 

With their standing in the polls at a record low it is quite incredible that they are doing so little to keep the nation moving. And to keep reminding drivers that they have a 2p per litre price rise waiting for when the government feels they can slip it in is frankly disgraceful.

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