Government's fuel tax windfall

20 May 2008

Extra £505 million since April
High oil prices means more tax collected
Calls for upcoming 2p rise to be scrapped

High oil prices means the Government has collected more tax than expected

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Fuel prices have risen so far since the beginning of April that the Government could easily afford to scrap the proposed 2p duty rise in October, according to the British Chambers of Commerce.

The Government is estimated to have earned an additional £505 million in tax from the rising price of oil, which is the same amount of money that will be raised by the proposed 2p fuel duty rise in October during this tax year.

The findings have come from the British Chambers of Commerce fuel duty model, which takes account of monthly fluctuations in fuel sales, the pound and dollar exchange rate, the price of crude oil and North Sea oil production.

In the March Budget, the Government based its assumptions on oil revenue at $83.8 per barrel. Since then, the cost of oil has gone beyond $125 a barrel.

The Government has benefited, because the increase in the price of oil has raised profits of the oil companies that are subject to North Sea Oil taxation and the price of fuel at the pump, upon which consumers pay VAT.

David Frost, director-general of the BCC, said: 'With the Treasury estimates on what it would bring in on fuel tax woefully out of line with reality, this £505m windfall in less than two months must surely rule out the 2p rise scheduled for October. It is simply unjustifiable.'