How much tax?

It was recently revealed that, before tax, Britain's diesel is the cheapest in Western Europe and its unleaded petrol is the third cheapest.

So why do we pay so much at the pumps?

Tax, that's why.

The UK Government's fuel tax rates are among the highest in Europe, and 690% higher than those in America, where rising oil prices have caused unrest, too, following massive increases over the past 15 years.

These increases have been justified by successive governments as a means of pushing people to buy more-efficient, less-polluting cars.

However, the taxation system has been criticised, because buyers pay fuel duty and VAT on all pump purchases.

Critics say that VAT should be added before fuel duty, not afterwards, because the present system means motorists are paying tax on tax.

So, as oil prices rise, the Government takes more money as VAT is added to the overall cost of the fuel, regardless of any changes to tax rates.

Estimates suggest that a 2p increase in tax income from fuel is worth around 1 billion to the Government each year.

How much tax we pay
56.94ppl (pence per litre) for conventional diesel
53.65ppl for conventional unleaded petrol
50.35 ppl for ultra-low sulphur unleaded petrol/diesel
30.35ppl for bio-diesel and bio ethanol
9.69ppl for rebated gas oil (red diesel)

VAT is then added at 17.5%.