Calls for tax cut as petrol prices hit 9-year high

RAC warns fuel prices are nearing all-time record levels as costs jump more than 4p in less than a month

Monday, 18th October 2021, 1:03 pm

The average price of petrol has risen to more than 140p per litre for the first time in nearly a decade, prompting calls for a temporary cut in VAT to ease pressure on drivers.

Unleaded now costs 140.22p per litre - the highest average price since September 2012 and just 2p per litre off the all-time high, which was recorded in April of that year.

Data from RAC Fuel Watch shows that petrol prices have now risen by nearly 26p in the last 12 month.

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The majority of the change has been caused by rising wholesale costs but the RAC said that the move to E10 unleaded in September had also caused a 1p per litre increase before VAT.

The motoring group’s fuel spokesman, Simon Williams, said that the increases, along with rising home energy bills were putting huge financial strain on households and called for the Government to intervene with a temporary tax cut.

He said: “We’re now worryingly close to the all-time average UK price high of 142.48p. At a time when households and businesses are facing spiralling prices in other areas this is a huge concern.”

As wholesale prices have forced up costs at the pump the VAT bill for drivers has also risen by 4p per litre in the last year.

Mr Williams said: “With just two weeks to go until COP26, the uncomfortable truth for the Government is that petrol prices are now reaching unprecedented levels and, along with rising domestic energy prices, will be putting a huge financial strain on households.

“While the cost of oil has more than doubled in a year, the price drivers pay at the forecourt is compounded by the fact there is nearly 58p in fuel duty charged on every litre. And, on top of the delivery cost and the retailer’s margin, you’ve then got VAT which currently accounts for 23p a litre – this has added 4p more a litre in just a year.

“For these reasons, it might be most effective for the Government to consider temporarily cutting the level of VAT on motor fuel to help hard-pressed drivers. While there have been calls for fuel duty to be cut in the past, there is a real risk that any such cut could be swallowed up by retailers rather than benefiting drivers. As VAT is charged on the final cost at the pumps, drivers would see the benefit immediately.”

The latest figures show that petrol prices have shot up by almost 4p per litre since late September, when a litre cost 136.83p on average. It now costs more than £77 to fill up an average family car with a 55-litre tank.