June 2015 fuel price update

37% cut back on car use as pump prices hit six-month high

37% cut back on car use as petrol pump prices hit six-month high

37% cut back on car use as petrol pump prices hit six-month high

Average UK petrol prices have reached a six-month high after bursting back above the 117p-a-litre mark for the first time since mid December – less than a penny shy of the 117.9p that broke the financial back of drivers just before the recession.

The strain has already begun to show as AA-Populus research for June’s AA Fuel Price Report shows that 37% of 28,080 AA members have already started to cut back on car use – 48% among lower-income motorists.

Petrol, on average, costs 117.19p a litre, up from 116.42p a month ago. Diesel averages 121.00p, up from 120.70p in mid May. Although the diesel pump price increase looks small, the fuel’s cost to the trade has been less than petrol’s for a month – representing a 3p-a-litre, or more than 3%, extra mark-up at the pump (before VAT).

Summer budget

The Chancellor’s summer budget, due 8 July, may be used by the Government to announce future increases in fuel duty.

The March budget cancelled September’s scheduled inflationary increase of 0.54p a litre but, even beyond that, the Treasury should tread carefully. It has already begun to pick up more tax per litre from inflated pump prices:

  • Since the 1 February low-point, the average price of petrol and diesel has risen more than 10p a litre, contributing at least an extra 2p a litre or £1 a tank in VAT to the Treasury.
  • With diesel cheaper than petrol at wholesale level but averaging at least 3.5p-a-litre more expensive at the pump, the ‘Great British diesel rip-off’ is already giving the Chancellor his 0.54p-a-litre tax boost in VAT – paid by more than 40% of ordinary, non-fuel-card drivers.

Rural rebate

A 31 May extension of the 5p fuel duty rebate to 17 more remote rural areas across the UK (Scotland, Cumbria, Northumberland, North Yorks and Devon) has achieved a startling turnaround in fortune in some areas but failed to take off in others. 

An immediate 6p drop in pump prices (the 5p + 1p VAT) doubled business at the Devon fuel station but drivers in Badenoch and Strathspey, Scotland, missed out, apparently due to confusion with the scheme. Last week, the MP for Durness and Scourie asked the Treasury why retailers there hadn’t been reimbursed for rebate savings passed on to their customers **.

Highs and lows

Across the UK, Wales unusually joins Northern Ireland in selling the cheapest petrol, averaging 117.0p a litre, while Scotland remains dearest at 117.6p.

Although Scotland is also most expensive for diesel, averaging 121.6p a litre, East Anglia’s 121.5p falls just behind. Northern Ireland’s 119.7p-a-litre average is not only the cheapest for diesel but makes it the only part of the UK with average diesel pump prices below the 120p mark.

don’t be mistaken into thinking that because pump prices are 13p-a-litre lower than this time last year that drivers are ripe for another fuel duty increase

Edmund King, AA president

Consumer spending

“This month’s AA Fuel Price Report illustrates vividly the power of pump prices on consumer spending – whether it’s 48% of lower-income drivers already cutting back on car use because of this year’s 10p hike in pump prices, or a 6p drop in price boosting a remote rural petrol station’s business by 100%,” says Edmund King, the AA’s president.

“It sends out a clear message to government on fuel tax: don’t be mistaken into thinking that because pump prices are 13p-a-litre lower than this time last year that drivers are ripe for another fuel duty increase. It won’t mean so much to some wealthier drivers, 28% of whom say high fuel prices don’t affect them, but up to 87% of less well-off drivers say it does.

“Since the war, governments have ratcheted up motoring taxes so much that 10% of the UK’s entire tax-take comes from drivers ***. Fuel duty is not a means-related tax but a mileage-related one, which discriminates against poorer drivers.”


(19 June 2015)

Fuel price data supplied by Experian Catalist

Wholesale price data provided by fuelpricesonline.com

**

Strathspey herald »

Parliament written answers »

Western Morning News »

***

UK voters with cars and other vehicles pay more in fuel duty (£26.9bn) alone than UK firms and companies pay in business rates (£26.8bn) and the equivalent of 97.5% of what is received through council tax (£27.5bn, according to the Budget Report 2015, Table C.3, page 110: Current Receipts - OBR). Other motoring taxes raise another £6.1bn in vehicle excise duties, and a further £25bn from VAT on fuel and car sales, company car tax and insurance premium tax. Of the £582.6 billion raised in UK taxes last financial year, almost 10% came from motorists.

These sums do not include: VAT from car repairs and other motoring-related expenditure, income to councils from parking charges, resident parking permits and penalty charge notices (parking and moving traffic offences), congestion charges, and bridge tolls. Dartford Crossing, alone, generates £90 million a year in income. Bus lanes in Scotland have generated £10 million in penalty charges.