Fuel tax is an imposed sales tax put on the sale of fuel. Frequently, fuel tax is looked upon as a source of general revenue, with some being put towards the maintenance of roads and highways.

Fuel Tax in the UK

Fuel tax in the UK is constantly changing and has risen steadily over the last 15 years. Between 1993 and 1999 there was a rapid increase with duties on fuel increasing by 3% above inflation. This was due to a major change in petrol taxation in 1993 when the Conservatives introduced the Fuel Price ‘escalator’. This was a way of the government making money and also to help protect the environment by discouraging people from using their cars.

Fuel Escalator Forces Prices Up

This fuel escalator forced prices up from one of the lowest in Europe to now one of the most expensive. When it was first added, fuel prices rose by 3 pence a litre and tax contributed to 72.8% of the total cost. By 1997 the escalator had added 11.1p to the cost of unleaded petrol and was at 75%. It didn’t get any better when the conservatives left office and Gordon Brown took over, as the escalator increased and 3 pence was added per litre. This took tax up to an incredible 81.5% of the total price of fuel.

Fuel Tax and the 2000 Fuel Protests

Despite the fuel escalator being abandoned in 1999, fuel prices did continue to rise rapidly, with a 2 pence a litre rise after the 2000 budget, contributing to the fuel protest. These rises were however argued by the government to be as a result of increasing oil costs rather than tax increases. This argument does hold some truth when we look at the graph above, showing that although the overall price of fuel has risen, the percentage of tax has stayed relatively constant and even dropped slightly this year.

In April 2005, tax on petrol and diesel were charged at 47.1 pence a litre which with VAT added also, the total taxation makes up a huge 69.9% of the price we paid for unleaded and 67.3% for diesel.

British drivers pay two taxes on petrol they buy at the pump and fuel campaigners complain about the fact that VAT is charged on the cost of fuel and the duty and feel it should only be calculated on the cost of the fuel for a fairer petrol price.

Duty on fuel in the UK increased again on 1 October 2007, with an increase of 2.00 pence a litre on unleaded and diesel and an even greater increase on LPG and natural gas. See the fuel duty for all fuels below:

2007 Fuel Tax Figures

2007 fuel duty (as of 1 October 2007) in the United Kingdom was:

• 50.35 pence per litre for ultra-low sulphur unleaded petrol/diesel
• 53.65 pence per litre for conventional unleaded petrol
• 56.94 pence per litre for conventional diesel
• 30.35 pence per litre for bio-diesel and bio ethanol – low tax to encourage consumer conversion
• 16.49 pence per kg for gas other than natural gas (LPG)
• 13.70 pence per kg for natural gas used as road fuel.
• 9.69 pence per litre for rebated gas oil (red diesel)
• 9.29 pence per litre for rebated fuel oil

As of 1 October 2007 effective rates of duty for non-road fuels increased by 2 ppl. These rates are set to be increased by the same percentage as the main road fuels on 1 April 2008 and again on 1 April 2009.

From 1 October 2007 duty rates for unleaded petrol, leaded petrol, aviation gasoline and other heavy oil used as road fuel were increased by the same percentage as the main road fuels.

2009 Fuel Tax Figures

2009 fuel duty (as of 1 September 2009) in the United Kingdom is:

• 56.19 pence per litre for main road fuels, unleaded petrol and diesel
• 65.91 pence per litre for leaded petrol
• 36.19 pence per litre for biodiesel and bioethanol
• 22.16 pence per kg for road fuel natural gas
• 27.67 pence per kg for road fuel liquefied petroleum gas (‘LPG’)

On 1 December 2008 a permanent 2p increase in fuel tax was introduced to offset the rate cut in VAT from 17.5% to 15% bringing the duty rate for the main road fuels up to 52.35p per litre.

On 1 April 2009 the duty rate for unleaded petrol and diesel was icreased by 1.84 ppl to 54.19p per litre and again on 1 September 2009 by 2 ppl to reach the current level of 56.19 per litre. These rates will be increased further on 1 April 2010 to 2013 by 1ppl above indexation each year.

Business and hard pressed people across the Highlands face even greater hardship due to fuel prices that are set to soar. Some estimates suggest that the more rural parts of scotland will face prices of around £1.30 per litre.

This is totally unacceptable and as if we wern’t facing enough problems this latest bombshell may see more and more people struggling to cope. How will penshioners manage to heat their homes ? The fact that the vast majority of the cost is tax that goes straight into the Labour Governments pockets is scandalous when they can see the pressure that people are already under thanks to Labours recession.

And what of the LibDem MP Danny Alexander. What will he do ? Not much. Not much a minority party MP like him can do anyway.

This general election will give the people of the Highlands an opportunity to elect an MP who will be able to deliver.

If the country is fortunate enough to elect a Conservative Government then I as the MP for this region will be in a far stronger position to bring real help and support to the people of the Highlands of Scotland instead of the empty weak words of the Liberals who can only whine and wring their hands in helplessness.

Jim Ferguson

Petrol Price Woe For Drivers As Costs Soar

4:28pm UK, Tuesday March 16, 2010

James Jordan, Sky News Online

Petrol prices could reach an eye-watering 120p per litre later this year, the AA is warning.

The organisation is claiming that unleaded fuel could even top the price, equivalent to £5.41 a gallon, and Alistair Darling is being urged to delay the introduction of a planned 3p increase in petrol duty due to come in on April 1.

AA president Edmund King said: “The UK is barely out of recession, yet petrol prices threaten to rise to record prices seen during the boom of 2008 – shortly before the collapse into recession.

“If families, drivers on fixed incomes and those on low pay were unable to cope with record prices then, they are even less likely now.”

AA research found an average family with two cars is paying £52 a month more to fill up now than a year ago.

The average petrol price in the UK is 115.9p for a litre of unleaded and 116.6p for a litre of diesel.

Even if the 3p increase is withdrawn, the price paid by drivers could soon hit 120p a litre – £5.41 a gallon – according to the organisation.

This would overtake the previous high of 119.7p of July 2008.

The AA said the price increases were caused by the rise in the price of wholesale gasoline since the end of January.

Lindsay Hoyle, the senior Labour MP on the Commons business select committee, said it was “a complete disgrace”.

He told the Daily Telegraph: “Yes, crude oil has gone up this year, but nothing like the rise in petrol prices. Motorists are being legally mugged at the forecourt by petrol companies.”