Fuel tax rate rise fails government

More pain, no gain as Treasury collects less tax from fuel duty hikes says AA.

30 November 1999 2 min read

CASH-strapped businesses are generating less tax for the Treasury.

This is despite the government piling on the fuel duty burden, says AA research into the government’s latest fuel retail sales figures.

The government last raised fuel duty at the Budget by 1.84p per litre. Another increase of 2p per litre is scheduled for September.

But according to the AA it’s the law of diminishing returns. In the first quarter of 2009, falling retail sales of fuel and diesel produced £97.3 million – or 2% less in fuel duty income than the same period 2008.

Despite the fall in fuel prices in the early part of January – and gradual recovery to 90p a litre through to March – retail sales figures from the Department of Energy and Climate Change show that UK petrol stations sold 212,000 fewer tonnes of petrol and 220,000 fewer tonnes of diesel.

The shortfall reduced fuel duty revenue from £4,829,514,980 in the first three months of 2008 to £4,732,217,440 in the first three months of this year.

Much of this fall in forecourt sales can be accounted for by the UK moving into recession, leading to lower business activity and drivers cutting back because of pay freezes, redundancy or reduced income from savings.