Fuel Tax
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 to use 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 47.1pence 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 in September 2006, with an increase of 1.25pence a litre on unleaded and diesel and an even greater increase on LPG and natural gas. See the fuel duty for all fuels below:
2006 Fuel Tax Figures
2006 fuel duty (as of September 2006) in the United Kingdom is:
48.35 pence per litre for ultra-low sulphur unleaded petrol/diesel
48.35 pence per litre for conventional unleaded petrol
48.35 pence per litre for conventional diesel
28.35 pence per litre for bio-diesel and bio ethanol - low tax to encourage consumer conversion
12.21 pence per kg for gas other than natural gas (LPG)
10.81 pence per kg for natural gas used as road fuel.
7.69 pence per litre for rebated gas oil (red diesel)
7.29 pence per litre for rebated fuel oil
The March 2007 Budget announced that from October 2007 there will be a 2 pence increase in fuel duty rates.