by Danielle Boxall, media campaign manager at the TaxPayers’ Alliance
This week our colleagues down under at the New Zealand Taxpayers' Union celebrated #FuelTaxHonestyDay. It’s part of their campaign against the extortionate rate of fuel taxes, which currently make up 52 per cent of the price of petrol in Auckland. This is an astonishing figure, but what is really shocking is that’s not an anomaly.
In fact, countries all over the world have similarly high levels of fuel taxation, including the UK. So just how much tax are Brits paying at the petrol pump?
For the majority of people, driving is the only option to get to work, drop the kids off at school and do the weekly shop. But despite this, British fuel taxes are higher than any other country in Europe.
Fuel duty directly contributes to the cost of living, pushing up bills for people around the country. Petrol currently costs 146.95p a litre on average, according to the Office for National Statistics' (ONS) weekly fuel price tracker. Of that, 57.95p is fuel duty and 24.49p is VAT. Because VAT is applied after fuel duty, drivers end up paying 20 per cent VAT on the pre-tax price of the fuel itself and then a further 20 per cent on the duty - effectively taxing a tax!
That means over 56 per cent of the price you pay at the pump goes to the taxman. HM Treasury will receive £28 for every £50 you spend filling up your car.
In 2021, fuel duty brought in almost £25 billion, but the government spent less than £12 billion on fixing and improving roads. And that’s even before we factor in the number of other taxes levied on drivers - vehicle excise duty (VED), congestion charges, the vehicle first registration fee. Motorists have a right to question where the rest of their money is going.
However, with electric vehicles growing in popularity in the push to go green, the government’s trusty revenue raiser may no longer be a reliable source of income. Sparking panic in the treasury, a transport select committee recently published a review looking into what could replace fuel duty.
The report recommends that the government replaces VED and fuel duty with a new pay-per-mile road pricing system. This is similar to the system proposed by Alistair Darling in 2005, which was axed after huge public backlash. However, there is a positive case to be made for it, which our research fellow Rory Meakin sets out here.
Drivers are already overtaxed as it is, so if we are to move Britain on from VED and fuel duty, a new road pricing system cannot just be a tool for the taxman to replace lost revenues. Any road pricing system should be set up to give drivers a fairer deal.
Ultimately, road taxes should be designed to manage traffic jams and pay for repairs, not simply shake down motorists for more money. At current rates of over half the price at the pump, that’s how many taxpayers already feel.