Budget 2012: Planned fuel duty rise will go ahead
The planned fuel duty increase of 3.02p per litre will come into effect from 1 August as planned, Chancellor George Osborne confirmed today.
This means petrol prices will rise by 3.62p a litre including VAT.
However, while Osborne said the Budget would "ease the burden on motorists", Edmund King, president of the AA, labeled it a "Budget blow-out" that will force two out of three drivers to cut down on journeys to meet the extra cost.
King said the move will swallow up 21% of the extra money available from the increase in the personal tax allowance coming into effect next April.
Once the new tax is in place, it will cost an extra £1.81 to fill up a typical 50-litre petrol tank.
Motoring experts have slammed the decision, saying the duty should have been frozen or lowered.
Gareth Kloet, head of car insurance at confused.com, said: "In a period where there are limited jobs, families struggling to pay bills and young people being priced off the roads as a result of rising car insurance premiums, the government announcement today to go ahead with the 3p rise in fuel duty will be hard for many people to accommodate."
In a bit to soften the blow, the Chancellor announced that prices won’t rise faster than inflation, unless oil prices fall below £45 a barrel.
Invented by a Frenchman in 1954 and ironically introduced in the UK on 1 April 1973, VAT is an indirect tax levied on the value added in the production of goods and services, from primary production to final consumption and is paid by the buyer. Its levying is complex, with a number of exemptions and exclusions. For example, in the UK, VAT is payable on chocolate-covered biscuits, but not on chocolate-covered cakes and the non-VAT status of McVitie’s Jaffa Cakes was challenged in a UK court case to determine whether Jaffa Cake was a cake or a biscuit. The judge ruled that the Jaffa Cake is a cake, McVitie’s won the case and VAT is not paid on Jaffa Cakes in the UK.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).