Business

Petrol duty and VAT rises to increase price of fuel

Petrol pump
Image caption Prices are set to rise further in January

Looming petrol duty and VAT rises are to push record petrol prices higher.

On New Year's Day, a government fuel duty increase put another 0.76p on to both petrol and diesel. And on 4 January, the rise in VAT from 17.5% to 20% will mean another price rise.

The AA estimates that the two increases will add around 3.5p to the cost of a litre of both petrol and diesel.

The average price of unleaded petrol in the UK stands at 124.16p, according to Experian Catalist.

This time last year, petrol was at 107.74p a litre and diesel at 109.46p.

Diesel currently costs, on average, 128.35p a litre - some five pence below its record high of July 2008.

'Tempting'

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 in 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."

The Freight Transport Association (FTA) said lorry drivers in 2010 had been paying an average of £3,800 more on fuel than in 2009.

It said the 1 January rise alone would add another £1,200 to annual fuel bills.

"Diesel is not an optional extra for industry. It is essential to keep shops stocked and businesses supplied with materials," said Simon Chapman, the FTA's chief economist.

The head of a haulage company based in Stoke, Barry Proctor, said the rises were unfair.

"This is a huge blow to the haulage industry. We've had horrendous weather conditions over the last few weeks, but yet again this industry has managed to deliver Christmas, unlike an awful lot of other industries that have failed their customers miserably.

"And instead of a pat on the back from George Osborne, it's another body blow."

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