Petrol prices lead to calls for tax rethink

The rising cost of crude oil has sparked record petrol price increases leading to calls for Alistair Darling to scrap fuel duty hikes in his 2008 Budget.

In February the cost of crude oil hit $100 a barrel for the first time ever. Figures from show that the price of unleaded petrol increased by 18.3p per litre in the last year alone.

Now, the AA says the average price of petrol per litre is 106p (07/03/08) while diesel stands at 112.1p. Recent figures from the Office of National Statistics also show that average petrol prices rose by 1.3p in January, compared with a fall of 0.8p during January 2007.

The increase in petrol prices has led to calls for the chancellor to scrap plans for a 2p fuel duty hike in his Budget on 12 March.

It Darling presses ahead with the 2p rise then it will mean duty on fuel will have gone up by 8.3% in under a year.

The AA says the Treasury has made an extra £4 billion in revenues from fuel in the last year. It estimates that if Darling were to scrap plans to increase fuel duty by 2p the government’s coffers would still be £3 billion better off because of other petrol related taxes.

Edmund King, the president of the AA, said: "The record pump prices are already hitting those on low incomes, rural, disabled and many car dependent motorists, so an extra increase would be unjust, unfair and unnecessary.

"There is a broad coalition against this increase from business groups, freight organisations, farmers, MPs and indeed motorists. The chancellor needs to listen to what the voters are saying and scrap this proposed tax increase."

Jon Day, a spokesman for RAC, said: “Increasing the tax on petrol at a time when people are feeling pain at the pumps is vicious – if anything, taxes should be cut.

“We understand the green issue but the government should offer incentives to drivers to lower their carbon emissions rather than penalising them. Also, there is no evidence that fuel taxes are being used to improve roads or public transport.”

Calls for tax breaks on petrol were one measure voiced by Londoners during the filming of the latest episode of Moneywise TV. Watch the programme to find out what other taxes the British public would like to see changed this Budget day.