Britain’s drivers are facing a further increase in fuel costs as higher oil prices feed through to petrol stations, potentially delivering a substantial VAT windfall to the Treasury ahead of Chancellor John Healey’s October Budget.
Howard Cox, founder of FairFuelUK, described the situation as a “national disgrace”, accusing the Government of failing to protect motorists while the fuel industry was “laughing all the way to the bank”.
He said drivers wanted their “deepening national plight” recognised as rising pump prices place additional pressure on families, van drivers and haulage businesses.
In the week to September 7, average UK pump prices reached 164.4p a litre for petrol and 186.4p for diesel. Brent crude closed at $103.98 a barrel on September 11, up about 9 per cent over the previous week.
With fuel duty frozen at 52.95p a litre, Cox argued that recent volatility had been concentrated in wholesale costs and retail margins. As pump prices rise, VAT receipts also increase because the tax is charged at 20 per cent on the final price paid by consumers.
For a typical family car travelling between 8,000 and 10,000 miles a year and achieving average fuel economy of 40 miles per gallon, annual petrol consumption is estimated at between 900 and 1,100 litres.
Cox estimated that an increase in petrol prices from 164p to 175p a litre would add about £100 to £120 to a vehicle’s annual fuel bill. For households operating two cars, the additional cost could reach £200 to £240 a year.
“Families are already stretched,” he said.
“An extra £100–£120 a year just to get to work, school and the shops is not trivial — it’s another blow in a cost-of-living crisis.”
If petrol and diesel prices move into FairFuelUK’s projected ranges, Cox estimated that the Treasury could receive between £800mn and £900mn in additional VAT revenue without increasing fuel duty.
Rod Dennis, RAC senior policy officer, said earlier this month: “The latest price rises throw into sharp focus just how exposed UK drivers can be to events thousands of miles away, and will likely increase calls for the Chancellor to demonstrate support for households already struggling with the rising cost of living.
“As things stand, fuel duty – which, together with tax, accounts for half of the cost of every litre of petrol we buy – is set to start rising from January but we believe there is a very strong case for leaving it at its current level, at least until the end of the Parliament.”
Cox argued that the combination of higher tax receipts and potentially wider supply-chain margins made government intervention increasingly urgent.
“The Treasury is set to gain nearly a billion pounds in extra VAT, the fuel supply chain could pocket another billion in margins, and ordinary drivers — from families to White Van Man to hauliers — are being hammered. The Government must act.”
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