As Labour force a debate in the House of Commons today over the deferred 3.02ppl duty rise on January 1, 2013, in an attempt to cancel or at least delay the increase until the spring, it seems that the Coalition and the media have conveniently overlooked the impact of VAT, asserts Brian Madderson, chairman of the Petrol Retailers Association.

He backed up his claims with the following information:

-Retail road fuels attract a tax on tax with VAT applied to the pump prices

-3.02ppl on January 1 with 20% VAT will mean pump prices rising by 4ppl

-The Coalition increased VAT from 17.5 to 20% from January 4, 2011

-Government statistics indicate that fuel volumes have dropped by less than 1% during the first half 2012 compared to the first half of 2011 which reduces revenue from duty by just £130 million for that period.

-’Windfall’ fuel tax from the higher level of VAT is estimated at £1.0Bn over the 2 years since implementation

- Further ’windfall’ fuel tax also arises from the higher level of VAT being applied to the ever-rising pump prices with petrol averaging 120ppl in January 2011 and now at 135ppl. This has been estimated to raise up to £500 million.

- Total extra fuel tax from VAT could be as much as £1.5 billion to the Treasury.

“The Government must cancel this proposed January increase," stressed Madderson. ’To defer would mean that it could combine with the planned duty rise on April 1, 2013, to push pump prices up by 7ppl and that would really wreck any economic recovery, hammer inflation and hit household budgets very hard. Such a rise would be without parallel since fuel taxation commenced.”