Soaring oil prices have provided the government with a tax windfall that makes any rise in fuel duty unnecessary, it has been claimed.
According to the British Chambers of Commerce (BCC), in the six weeks since 1 April the exchequer has benefited from £505 million in tax raised on the back of rocketing oil prices.
This, the BCC argued, is equivalent to the revenue that would be raised during this tax year by the proposed 2p fuel duty increase in October.
The findings came from the BCC’s fuel duty model which takes account of monthly fluctuations in petrol and diesel sales, the dollar/sterling exchange rate, the price of Brent Crude oil and North Sea oil production.
Back in March, at the time of the Budget, the Treasury had calculated its likely revenue from oil tax on a price of $83.80 a barrel, the BCC said. Since then, the cost of oil has reached a high of $126.40 per barrel.
The BCC estimated that the increase in the government’s North Sea Oil tax revenues represents £390 million of the £505 million windfall, the remaining £115 million coming from extra VAT on fuel sold at the pump.
David Frost, the director general of the BCC, said: “The rising cost of petrol is hitting everybody hard, not just businesses. Seeing the fuel gauge barely move when you put in £20 is frustrating and only going to get worse.
“With the Treasury estimates on what it would bring in on fuel tax woefully out of line with reality, this £505 million windfall in less than two months must surely rule out the 2p rise scheduled for October. It is simply unjustifiable.”
Date:16 May 2008
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