Fuel Duty rise ahead of VAT increase

Added on Saturday, January 1st, 2011 by Carole Nash Editor | No Comments

Petrol prices are set for a big increase over the New Year Bank Holiday, with a 0.76p being applied to both petrol and diesel today, ahead of a further increase when VAT rises to 20% on January 4.

A duty increase will add just 0.76p to the price of a litre, with Tuesday’s VAT increase combining to add around 3.5p to the cost of a litre in the coming week.

The average price of unleaded petrol in the UK currently stands at 124.16p, according to Experian Catalist, compared with 107.74p a litre this time last year.

The AA estimated that in total, motorists are spending almost £10m more a day on petrol than this time a year ago.

And the RAC Foundation pointed out that fuel tax would rise even further later in the year, with another increase in duty scheduled for April.

“Given that each penny increase in fuel duty raises about an extra £500 million for the Exchequer, it is easy to see why the chancellor is tempted to hike rates,” said the foundation’s director, Professor Stephen Glaister.

“But if the nation’s 34 million motorists are pushed too far they will drive less and the Treasury could actually see their tax take fall. At the election there was much talk about a fuel duty stabiliser. Drivers will rightly be wondering what happened to that idea.”

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