Redwood welcomes the exposure of Government’s fuel duty windfall

John Redwood has welcomed a report published by the British Chambers of Commerce on Friday which reveals the £505 million windfall received by the Government in just six weeks on account of the rising price of oil. The BCC’s report calculates the Government’s actual tax revenue from fuel duty and VAT at the pump, which is much greater than its budgetary prediction in March. The Government based its assumptions on oil revenue being $83.80 per barrel whereas the cost of oil has in fact since reached a high of $126.40 per barrel.

The report exposes what the Government has been reluctant to admit in response to parliamentary questions. Speaking of the report, John Redwood said:

‘I am pleased the BCC have calculated the extra cash the Treasury is looting from higher petrol and diesel prices. As an MP I have tabled questions to get the Treasury to come clean about this latest huge stealth tax, but of course they refuse to answer. It is typical of this government that they will not tell Parliament the truth, and leave it to a private sector body to work out the truth about their tax demands.

‘I have called for the government to cut petrol and diesel duty so that they collect this year the budget forecast amount, and not a penny more. This is another rip off of the motorist, at a time when family budgets are under huge pressure.’

Notes to editors:

A summary of the BCC’s findings can be found here.

The parliamentary questions asked by John Redwood on 8th May, and their replies, were as follows:

Mr. Redwood: To ask the Chancellor of the Exchequer (1) what estimate he has made of the revenue to the Exchequer which will accrue from taxation of petrol and diesel in 2008-09 if fuel prices remain at their current level; and what forecast he made for such revenues for 2008-09 in Budget 2008; [203778]

(2) what assumption was made in Budget 2008 about the price of a litre of petrol; [203779]

(3) what the tax take is on a litre of petrol costing 110 pence at the pump. [203781]

Angela Eagle: The current fuel duty payable on a litre of petrol is 50.35p and is the total amount of tax paid by businesses that can reclaim VAT. For households and businesses that cannot reclaim VAT, it is charged as 17.5 per cent. on the sum of the pre-tax price of petrol and fuel duty.

In estimating the impact on receipts of spending on fuel it is necessary to take into account a broad and complex range of reclaims and displacement factor, over a reasonable period of time.

The forecast revenue for 2008-09 from fuel duty is published in table C.6 of the 2008 Financial Statement and Budget Report. This can be found here.

Road fuel duties are charged at a fixed amount per litre and higher road fuel prices generally reduce revenues from fuel duties as they result in lower fuel consumption. The impact of higher oil prices on overall tax revenues and the public finances is complex, and will depend on their wider impact on the economy in general, including the effect on factors such as profitability and retail prices. Reliable estimates of the impact of changes in prices are not available.

The petrol price incorporated into the Budget 2008 forecast for fuel duties was consistent with the NAO audited assumption on oil prices. This assumed that oil prices would average $83.8 a barrel in 2008, the average of independent forecasts.

1 Comment

  1. Gerard Young
    May 21, 2008

    50.53p per litre on the pretax value of the fuel that was 96p in Sept 07 and is now 117p per litre

    On the 50.53p I pay 17.5% VAT which comes to 59.37p

    This leaves 57.63p which is also taxed at 17.5%

    This means the Government gets another 10.08p

    Or in total 67.63p

    Bear in mind that someone that was filling a 60 litre tank in Sep did it for £57.60 and now has to pay £70.20, and the fact that they are almost certainly paying with taxed income taxed at 22%.

    So for the £70.20 it now costs of fill the tank the government has taken

    £15.44 in income tax before (22%)
    £40.57 in Vat and Duty
    £7.72 in National Insurance (11%)

    a fine total of £63.73

    So by my reckoning the revenue on a litre of fuel is roughly 91% of the total price. or 106.5p put of the 117p per lirte

    I wrote to Michael Ancram about this (my MP) maybe you can do something about it.

    You can give this back of fuel receipt calculation to Angela Eagle just to let her know that even if she can’t tell you how much the government gets from every litre of fuel, most of us can work it out pretty quickly. Taxation at these sorts of levels is not taxation its legalised robbery.

    Reply: Indeed. Thanks for that.


    Gerard Young

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