Petrol Tax

European comparisons

3 March 2010

Post-credit crunch petrol tax hits UK drivers worst among European neighbours

Hikes in petrol tax since "the credit crunch" have hit UK drivers up to five times harder than in neighbouring European countries, AA Fuel for Thought research reveals.

Since the Pre-Budget Report on 24 November 2008, the burden of fuel duty and VAT on a tank of petrol in the UK has gone up 11.46%, compared to just 2.23% in Austria. The average increase for 10 mainstream European countries, including France, Germany, and Holland, is 5.07%.

For UK diesel car owners, tax at the pump has risen nearly three times more than the average increase for the 10 European neighbours.

Adding to the UK drivers' burden, the budget is scheduled to deliver UK motoring families an early Easter egg with an inflation + 1p increase in fuel duty the day before Good Friday (April 1). This could potentially add another 2.5p a litre to the pump price of petrol and diesel*.

For petrol, EU figures show that drivers in Germany, Austria and Portugal have seen their tax go up between 2% and 2.6% since the autumn of 2008. Only Spain comes close to the UK increase, with a 10.36% increase.

For UK diesel car owners, the fuel's tax burden has increased 8.10% – marginally lower than the 8.33% in Ireland but well above the 2.89% average for the 10 European countries. In five of those countries, the tax-take is lower now than in November 2008, reflecting the collapse in the European wholesale price of diesel. It is a saving that has been denied to UK, Irish, Dutch, Belgian and Spanish drivers.


"The AA Fuel for Thought research shows that most other European countries have resisted such fuel tax hikes over the past 15 months, and they have also had to deal with the fallout from the credit crunch," says Edmund King, the AA's president.

"The Treasury admitted in the last Pre-Budget Report that the impact of higher fuel prices on demand will lower fuel duty receipts in 2009-10 by £0.2 billion below forecast**. And with higher fuel prices contributing significantly to inflation, adding another 2.5p to the cost of petrol and diesel in April could do more harm than good to the public purse, economic recovery, hauliers and car owners.

"Petrol and diesel are necessities for the majority of the population and businesses, yet are taxed as luxuries. Further increases could back-fire on economic recovery."


Source: European Commission for Energy statistics

* Fuel duty on April 1 is due to rise by inflation + 1p. Assuming a 2% inflation rate, fuel duty will rise from 56.19p a litre to 57.31p or 1.12p more. With the additional 1p + VAT at 17.5%, drivers will pay 2.49p a litre more for petrol and diesel. A family with two petrol cars will pay £5.29 a month more for fuel.

** Pre-Budget Report 2009 – Annex B : The Public Finances, section B68

B.68 Fuel duties in 2009-10 are expected to be £0.2 billion below the Budget 2009 projection. Relative to the Budget, a deeper downturn in the first half of 2009 and a higher oil price negatively affected fuel duty receipts. With fuel duty charged on a per litre basis, higher pump prices would reduce demand and hence receipts. With oil prices over $20 a barrel higher from 2010 onwards, higher oil prices take around £0.7 billion per year off fuel duty receipts

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5 March 2010