RAC calls for temporary cut in VAT as fuel prices near record levels

The average price of a litre of petrol sold on UK forecourts has reached its highest level since September 2012 - 140.22p - reports RAC Fuel Watch.

Data shows prices have now gone up by nearly 26ppl in the past 12 months, from 114.50ppl on the same day last year – a jump of 22%. The major factor has been the rising cost of a barrel of oil which in the same period has doubled from $41 to $83, which means drivers are now paying 4p more in VAT on a litre of petrol than they were a year ago – from 19ppl in October 2020 to 23ppl today.

September’s switch to E10 petrol – which increased the biofuel content of petrol from 5% to up to 10% - has also contributed slightly to the price rise by adding around 1ppl to the cost before VAT is applied.

RAC fuel spokesman Simon Williams, said: “Our data shows we haven’t seen the petrol price at this sort of level since September 2012, and we’re now worryingly close to the all-time average UK price high of 142.48ppl that was hit in the same year. At a time when households and businesses are facing spiralling prices in other areas, this is a huge concern.

“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 that depend on their vehicles and, in turn, the economy. We call on the Government to take action and do whatever it can to help ease the burden on drivers.

“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 23ppl – 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.”