The Prime Minister's latest move to help drivers with fuel costs has been branded insultingly insufficient, as the current freeze on fuel duty is set to end on January 1, adding more tax to already record-high prices at the pump.
Announcing that drivers will be able to use Google Maps to compare petrol and diesel prices was described as a nifty idea in isolation, but it falls far short of what motorists really need. The comparison tool comes as diesel prices have surged past £2 a litre in record new highs, leaving drivers struggling to afford to go to work, do the school run, or visit loved ones.
Tax breakdown at the pump
Breaking down that £2 a litre fill up, 52.95p currently goes to the government in fuel duty, and then another roughly 32p goes on VAT, for a total of approximately 85p per litre. VAT is charged on the fuel duty as well, meaning drivers are taxed on their tax. Retailers keep the other £1.09 or so.
From January 1, the current freeze on fuel duty will end, meaning another 5p in tax will be added to the price at the pump, pushing the take up to 57.95p a litre. With VAT added on top at 20%, a £2 a litre price would instantly become closer to £2.05 or £2.06, and that is if prices do not rise further.
No commitment to extend freeze
So far, Mr Burnham and his Chancellor John Healey have refused to commit to extending the freeze on petrol and diesel, urging drivers worried about the ongoing crisis to wait until the Budget.
Even if they do announce another extension to the freeze, it is not enough. The argument is that drivers do not just need another freeze, but an actual cut.
Lib Dem leader's 10p cut proposal
Sir Ed Davey is pushing Andy Burnham for a 10p a litre fuel duty cut to be put in place right now and said the move could be paid for through the money higher oil, gas and energy prices bring into the Treasury coffers.
Sir Ed told PA: “The Government’s getting a huge amount of money into the exchequer because of higher oil and gas prices, higher energy profits levy, higher gas tax revenue, higher VAT.
“And rather than keeping that in when people are struggling with the cost of living, with the cost of fitting up their car with petrol and diesel, we think they should give it back.
“And if they did that by cutting fuel duty by 10p, that’d be a 12p reduction at the pumps.
“That would really help people who are struggling with fuel costs.”
Going back to the fuel breakdown, if you wind it back to January prices, where diesel was 142p per litre, the fuel duty take was roughly just 77p per litre, compared to 85p now. That means the government has pocketed an extra 7p per litre off every bit of fuel in your car since prices hit £2. Give it back, and the government has ‘lost’ nothing, it is just rebating a tax take which was not anticipated in its last Budget anyway and never should have taken off struggling drivers in the first place.
