Many retailers will doubtless remember that increases in duty were once routine - in fact automatic at virtually every Budget. Between 1993 and 2000, the increases were explicitly intended to be significantly above general inflation, regardless of which government was in office.
Only the massive disruption of nationwide fuel protests in September 2000 made the then-government pause. For the next 10 years, the policy became more ad-hoc. Successive governments would hesitantly announce intended increases with one eye on the inflation rate and the other on the actual price of fuel which was rising anyway while they listened for just how loud the howls of protest became. If the anger seemed to become dangerously loud, they would reduce or defer the increase pending another six- or 12-month review.
Will he, won’t he?
This ’Will he, won’t he?’ game continued until 2011. Think back five years; the economy was still attempting recovery from the worldwide banking crises, but retail fuel prices were rising rapidly. The average price of unleaded rose between the May 2010 election and March 2011 from around 121ppl to 132ppl, diesel was significantly higher, and the trend was still upwards. The coalition government abolished automatic increases and in 2012 replaced them with what they called the Fair Fuel Stabiliser meaning that above-inflation rises would only be restored if the price of oil fell below a key value for a sustained period.
The exact threshold figure remains a little hazy. It was originally intended to be around $75 a barrel, but was subject to ’consultation’. In practice, as world oil prices rose fairly consistently upwards of $100/barrel for the next few years, the lower limit became academic.
Today some things look a little different: the economy may be fragile (still, or again), the inflation rate near zero, but oil prices have been bouncing around between $25 and $50 for months, and retail prices of both petrol and diesel have been around £1/litre since December. A Chancellor looking to help plug the gaps in his Budget may find it hard to resist going back to the Fair Fuel Stabiliser and hiking duty rates after all, it’s a long time to the next election the question may only be ’How much’?
Non-duty paid fuel
While the financial pages have been trailing the prospect of an increase in fuel duty, the news pages seem to be carrying almost daily stories of court cases and prison sentences for criminals convicted of selling fuel without any duty, or VAT for that matter. Ranging from so-called ’recycled diesel’, ’Red Diesel’ or just plain old-fashioned heating oil (Kerosene) being sold from a variety of premises even occasionally including what appear to be regular forecourts. This isn’t a new problem, but one that many people assumed to be largely prevalent when diesel prices were approaching £1.50/litre, not something still happening so frequently at current lower retail prices. Presumably, the temptation to avoid 57.95p duty per litre (and the 11.59p VAT on the duty alone) is still too much for some people, outweighing the threat of several years’ inside one of HM’s hotels.
Who’s buying it?
One of the surprising elements of many reports is the sheer volume of fuel involved when these cases are brought before the courts: tens (or even hundreds) of thousands of litres are commonly reported. This raises two immediate questions: who are the customers for an illegal product that they must suspect will wreck their engines; and how can the operators obtain such large volumes of heating oil, farm diesel, etc, without arousing the suspicion of any (presumably innocent) wholesale suppliers? After all, apart from the so-called ’recycled derv’ which almost invariably comes from other criminal outfits, any legitimate petroleum distributors must surely look twice at new customers ordering thousands of litres of non-road fuel.
It’s also difficult to understand how any outwardly ’legit’ retail forecourt can seemingly shift several hundred thousand litres of fuel ’off the books’ without anyone else noticing something pretty odd going on. Those sorts of quantities involve a lot of tankers, and what sort of ’accounting’ can be going on there to hide these stock movements, when even an elementary wet-stock reconciliation would immediately show that there was a bit of a discrepancy of deliveries against proper sales?
We all need to be clear: this isn’t a victimless crime. The punters buying the stuff risk more than just engine damage; anyone found with illegal fuel in their vehicle faces a hefty fine, a criminal record, and having their vehicle impounded permanently. The loss to the taxpayer (that’s all the rest of us) runs into millions of pounds each year, which merely adds to the pressure on services and tax rises elsewhere. And, of course, the victims include the thousands of legitimate forecourt retailers in the UK who struggle to make a living while accounting for every penny of duty and VAT owed to the government. We know that HMRC has suffered many staffing cuts in recent years, so it’s not unreasonable to assume that for every successful prosecution making the news, there are likely to be several more operations that they haven’t found.
There will always be a hard core of completely criminal underground (no pun intended) operations that remain almost invisible. However, where outwardly legitimate retail outlets are involved, then it should be easier to identify.
One possible route would be for all wholesale fuel suppliers to require their retail customers to provide independently-audited stock and usage/sales figures on a regular basis as a contractual condition of continued supply.
It wouldn’t be a perfect answer, but maybe enough of a deterrent to reduce the temptation for anyone in this industry to dabble in the murky and dangerous world of illegal fuels.