Fuel tax - freeze, and should it have been frozen in the first place?

[whole diary]

[grahame]

From the BBC^» (British Broadcasting Corporation - home page)

Calls grow for Reeves to ditch fuel tax hike over Iran

Chancellor Rachel Reeves is facing growing calls from opposition parties to reverse a planned hike to fuel duty as the conflict in the Middle East continues.

The tax rate on petrol and diesel is due to rise from September, when a 5p cut made after Russia's full-scale invasion of Ukraine is set to be phased out.

But Reform UK^▸ (United Kingdom), the Conservatives and the Lib Dems are all arguing that the war in Iran means the chancellor should keep the cut in place.

Energy prices have risen since the US and Israel began strikes on the country, amid fears the conflict would cause lengthy disruption to supplies.

The headline rate on standard petrol and diesel is 52.95 pence per litre, which has been frozen since 2011-12, including a "temporary 5p cut" introduced in 2022-23 which is supposed to be being withdrawn later this year.  Fuel Duty - £24 billion - £835 per household

For the financial year April 2024 to March 2025, the UK rail industry's income from passenger fares was £11.5 billion (and £12.6 including other sources). Government funding for the UK rail industry in 2024-25 was £11.9 billion, supporting nearly half of the total £25.9 billion in industry income.

52.95 pence in 2011 would be equivalent to 77.89 pence today.  If that 25p fuel tax that has been foregone were to have been taken this year and invested in the railways, it would amount to an extra investment / income of around £12 billion. So fares could be halved and £6 billion invested too.

Of course, it gets more complicated; reduced fares and increased investment (if it's done right) will rocket passenger numbers, and passenger numbers will grow; being mass transit, the cost per passenger reduces and you have whole new balance of sustainable public transport becoming the norm.  UK electification rates more in line with other counties in Europe?   People moving even more rapidly away from fossils fuels?  `Inflation stoked by the tax increase and political unrest from those reliant on private cars?

[TaplowGreen]

From the BBC^» (British Broadcasting Corporation - home page)

Calls grow for Reeves to ditch fuel tax hike over Iran

Chancellor Rachel Reeves is facing growing calls from opposition parties to reverse a planned hike to fuel duty as the conflict in the Middle East continues.

The tax rate on petrol and diesel is due to rise from September, when a 5p cut made after Russia's full-scale invasion of Ukraine is set to be phased out.

But Reform UK^▸ (United Kingdom), the Conservatives and the Lib Dems are all arguing that the war in Iran means the chancellor should keep the cut in place.

Energy prices have risen since the US and Israel began strikes on the country, amid fears the conflict would cause lengthy disruption to supplies.

The headline rate on standard petrol and diesel is 52.95 pence per litre, which has been frozen since 2011-12, including a "temporary 5p cut" introduced in 2022-23 which is supposed to be being withdrawn later this year.  Fuel Duty - £24 billion - £835 per household

For the financial year April 2024 to March 2025, the UK rail industry's income from passenger fares was £11.5 billion (and £12.6 including other sources). Government funding for the UK rail industry in 2024-25 was £11.9 billion, supporting nearly half of the total £25.9 billion in industry income.

52.95 pence in 2011 would be equivalent to 77.89 pence today.  If that 25p fuel tax that has been foregone were to have been taken this year and invested in the railways, it would amount to an extra investment / income of around £12 billion. So fares could be halved and £6 billion invested too.

Of course, it gets more complicated; reduced fares and increased investment (if it's done right) will rocket passenger numbers, and passenger numbers will grow; being mass transit, the cost per passenger reduces and you have whole new balance of sustainable public transport becoming the norm.  UK electification rates more in line with other counties in Europe?   People moving even more rapidly away from fossils fuels?  `Inflation stoked by the tax increase and political unrest from those reliant on private cars?

Graham this isn't just about people and their private cars

Fuel duty affects manufacturers, distributors, retailers, logistics, haulage and agriculture.

Increase these costs and inflation will rise with them as they are passed on through supply chains to end users, who are quite often already struggling to make ends meet, and it potentially has a devastating impact on an already shaky economy.

Public transport complements road transport - it cannot and will not ever take its place in the way some aspire to, it is simply not living in the real world to suggest otherwise, and politically I think you will find there are far more appealing homes for additional tax revenue than the railway, at least in the proportions you are suggesting.

[grahame]

Graham this isn't just about people and their private cars

Fuel duty affects manufacturers, distributors, retailers, logistics, haulage and agriculture.

I appreciate that - perhaps a bit more than I made out.  I did understand that these is a special "agricultural diesel" rate - "red diesel" at a much lower rate- or is that a thing of the past past?

Increase these costs and inflation will rise with them as they are passed on through supply chains to end users, who are quite often already struggling to make ends meet, and it potentially has a devastating impact on an already shaky economy.

Public transport complements road transport - it cannot and will not ever take its place in the way some aspire to, it is simply not living in the real world to suggest otherwise, and politically I think you will find there are far more appealing homes for additional tax revenue than the railway, at least in the proportions you are suggesting.

Yes - and of course some public transport IS road transport  . ...  I did a "reductio ad absurdum" exercise and, agreed, it WOULD be absurd to take it all the way!    There's is some scope though - and the example a gave at looked at a single year, where in practice investment in one year would reap benefits for many years thereafter.

[Chris from Nailsea]

... I did understand that there is a special "agricultural diesel" rate  - "red diesel" at a much lower rate- or is that a thing of the past?

Red diesel is indeed still a feature of the fuel supply - allowed for agriculture, forestry and domestic power (not propulsion) on private narrowboats, for example. 

Our local garage used to sell it - from a specific pump, which had a separate key to operate it, and which had to be obtained from the garage office by legitimate users for each transaction. That facility disappeared when our local garage changed hands, and, to be honest, we never had that many tractors (or narrowboats) passing under the railway bridge at Nailsea & Backwell who would have refuelled there. 

CfN^▸ (Chris from Nailsea, an administrator on this forum). 

[TaplowGreen]

Graham this isn't just about people and their private cars

Fuel duty affects manufacturers, distributors, retailers, logistics, haulage and agriculture.

I appreciate that - perhaps a bit more than I made out.  I did understand that these is a special "agricultural diesel" rate - "red diesel" at a much lower rate- or is that a thing of the past past?

Increase these costs and inflation will rise with them as they are passed on through supply chains to end users, who are quite often already struggling to make ends meet, and it potentially has a devastating impact on an already shaky economy.

Public transport complements road transport - it cannot and will not ever take its place in the way some aspire to, it is simply not living in the real world to suggest otherwise, and politically I think you will find there are far more appealing homes for additional tax revenue than the railway, at least in the proportions you are suggesting.

Yes - and of course some public transport IS road transport  . ...  I did a "reductio ad absurdum" exercise and, agreed, it WOULD be absurd to take it all the way!    There's is some scope though - and the example a gave at looked at a single year, where in practice investment in one year would reap benefits for many years thereafter.

There is scope certainly - but rather like the NHS it isn't necessarily about throwing more money at it, but using the vast amounts already in the system more efficiently.

[Red Squirrel]

Does anyone understand why governments apply flat-rate duties on some goods and services, but percentage taxes on others?

It strikes me that there is scope for a stealth tax here - replace duty with percentage taxes (maybe initially in the guise of a slight reduction) and then allow something related to fiscal drag to uplift the tax take with inflation.

Seems a lot less politically painful than the current modus operandi to me (but maybe that's why I'm not a politician!)

[Chris from Nailsea]

Humphrey Appleby would be happy to explain that one to you, Minister Red Squirrel.

[Western Pathfinder]

When you consider the amount of tax including vat on fuel duty ! HMG has its hand well and truly rammed into the motorists wallet as it is ,increasing the rate is not going to do any good for the economy and will only serve to punish those who are struggling to afford to run a vehicle already .
I also see no mention of the increase in duty being gathered currently,caused by the increase in crude oil prices….

[Chris from Nailsea]

Well, we in my household are doing our bit for the economy by avoiding paying such exorbitant taxes.

Since October last year, we have not had a car - thus avoiding paying any fuel duty, vehicle excise duty, MoT tests, insurance costs and the VAT^▸ (Value Added Tax) thereon.

Instead, my wife and I use our senior bus passes, to travel free.

[eXPassenger]

Does anyone understand why governments apply flat-rate duties on some goods and services, but percentage taxes on others?

Like so many things it comes down to history.
Customs & Excise collected taxes based on units.  eg bottle of whisky, gallon of petrol etc.  This simplicity was removed when they had responsibility for purchase tax and then VAT^▸ (Value Added Tax) which were percentage based.

Inland Revenue collected taxes on income and capital and used percentages.

They have both now been merged into HMRC.

The total tax on 1l of fuel is slightly over 80% so we could replace fuel duty by applying VAT at 80%.  Imagine the headlines.

Personally I belive that fuel duty should have been allowed to slowly increase ather than be held at the reduced level.

[Chris from Nailsea]

They have both now been merged into HMRC.

Thanks for your informative post, eXPassenger. 

However, purely in the interest of historical accuracy, the merger of the official customs, excise and revenue collection authorities hasn't just 'now been merged into HMRC': that was actually done on 18 April 2005. 

CfN^▸ (Chris from Nailsea, an administrator on this forum). 

[eXPassenger]

They have both now been merged into HMRC.

Thanks for your informative post, eXPassenger. 

However, purely in the interest of historical accuracy, the merger of the official customs, excise and revenue collection authorities hasn't just 'now been merged into HMRC': that was actually done on 18 April 2005. 

CfN^▸ (Chris from Nailsea, an administrator on this forum). 

Since I was quoting the historical development of the 2 organisations I stand by the use of the word 'now'.  I did not use 'just now'

[Oxonhutch]

From my South African days:

Now - sometime in the future,
Just now - sometime in the near future,
Now now - should be soon - hopefully.