The price of fuel in the UK is a complicated business and it changes month to month as the cost of crude oil rises and falls with international demand. British drivers also pay two taxes on the petrol they buy at the pump: Fuel Duty and VAT. Of these, fuel duty remains by far the most significant - and remains the most controversial. Fuel Duty If a litre of unleaded petrol costs 85p, 21.7p will be the production costs and profit, around 51p will be duty and 12.5p will be VAT on top of all that.
According to figures released with the 2000 Budget, the Government forecasts that fuel duties will continue to rise rapidly from a £21.6bn in the 1998-99 financial year to £23.3bn by the end of the 2000-01 financial year. It’s a lot of tax, but the Institute of Fiscal Studies, an independent think tank, says that the large rises in fuel duty began as far back as 1979. Fuel Escalator The major change in petrol taxation came under the Conservatives in 1993 with the introduction of the Fuel Price Escalator. The escalator was designed as a means both to raise money and discourage car use on environmental grounds. At the time, British fuel was the third-cheapest in Europe. It is now the most expensive. The annual fuel escalator was set in 1993 at 3% above the rate of inflation. On its introduction it added three pence to a litre of fuel and raised the tax burden on unleaded petrol to 72.8% of the total cost. When the Conservatives left office in 1997, the escalator was at 5% and had contributed a 11.1 pence rise to the cost of unleaded fuel. Tax as a proportion of total cost stood at 76.3%. Labour’s record On taking office, the new chancellor Gordon Brown increased the fuel escalator further and put three pence onto a litre of petrol in his first Budget. That pushed taxes up to 81.5% of the total price of fuel. While duty rose by two pence a litre as part of the 2000 Budget, Gordon Brown also scrapped the fuel price escalator, saying that future increases would be decided on the basis of the “due Budget process”. At the time, and perhaps rather ironically given current events, the AA said that it was the first budget in seven years in which “drivers can take some heart”. According to the Tories this isn’t good enough. They say that since Labour came to office, the petrol pump price of unleaded petrol has risen by around 71%. And while there have been large jumps in the price of oil, the party blames what it says is Labour’s 16p per litre rise in taxes. Figures from the Institute of Fiscal Studies tell a slightly different story. The Conservative figure of 16p per litre is a combination of duty and VAT. While the actual amount brought in by VAT rises with increases in fuel prices and duty, it is calculated at the same 17.5% level which the present government inherited from the Conservatives. VAT campaigning Fuel campaigners argue that VAT should only be calculated on the cost of the fuel rather than on the fuel and the duty together. If VAT was not charged on the duty, the motorist would save around 8p per litre at September 2000 prices. None of the parties appear to support that move. Leaving aside VAT, fuel duty increases under Labour amount to 12 pence per litre - just slightly more than the rise caused by the escalator under the Conservatives. Because of the rise in world oil prices, the proportion of the total fuel cost that is tax has fallen from 85% (March 1998) to 72.3% today - still one of the highest levels in the world - something that ministers have sought to stress in interviews. With the Tories pledging a three pence a litre cut should they come to power, the question is whether the Government should cut fuel duty - and whether the country can afford it.
"Philip Hollsworth offered this good idea:
This makes MUCH MORE SENSE than the 'don’t buy petrol on a certain day campaign that was going around last April or May! The oil companies just laughed at that because they knew we wouldn’t continue to hurt ourselves by refusing to buy petrol. It was more of an inconvenience to us than it was a problem for them. BUT, whoever thought of this idea, has come up with a plan that can really work. Please read it and join in!
Now that the oil companies and the OPEC nations have conditioned us to think that the cost of a litre is CHEAP, we need to take aggressive action to teach them that BUYERS control the market place not sellers. With the price of petrol going up more each day, we consumers need to take action. The only way we are going to see the price of petrol come down is if we hit someone in the pocket by not purchasing their Petrol!
And we can do that WITHOUT hurting ourselves. Here’s the idea: For the rest of this year DON’T purchase ANY petrol from the two biggest oil companies (which now are one), ESSO and BP. If they are not selling any petrol, they will be inclined to reduce their prices. If they reduce their prices, the other companies will have to follow suit. But to have an impact we need to reach literally millions of Esso and BP petrol buyers. It’s really simple to do!!
PLEASE HOLD OUT UNTIL THEY LOWER THEIR PRICES TO THE 69p a LITRE RANGE
It’s easy to make this happen. Just send this message in an email, and buy your petrol at Shell, Asda,Tesco, Sainsburys, Morrisons Jet etc. I.e.
boycott BP and Esso"