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Last Updated: Monday, 1 October 2007, 11:35 GMT 12:35 UK
Tax rise fuels petrol price fears
Motorist fills up his car with petrol
The increase in fuel duty came into effect at midnight
Petrol prices could surge to near record highs following a 2p rise in fuel duty.

That increase could push up the average price of unleaded to about 98p, while diesel could exceed 1 if the cost is passed on to motorists.

The Petrol Retailers Association said the rise would put an undue "strain on motorists and petrol retailers alike".

BBC economics editor Evan Davis said the rise would be nearer to 2.3p when VAT was taken into account.

The increase, in line with inflation, was first announced in Gordon Brown's 2007 Budget when he was chancellor.

The duty rise comes amid soaring oil prices and high borrowing costs.

The Budget also outlined another rise of 2p a litre next April and a further increase of 1.84p in April 2009.

Petrol Retailers Association director Ray Holloway said the number of petrol stations was already falling and it would "not take much to push more stations out of business".

Everyone affected

FUEL PRICE FACTS
Fuel duty will go up by 2p from 1 October
If the cost is passed on, petrol prices could reach 1 a litre
It will mean duty on diesel accounts for more than half of its cost, the highest in Europe
BP was the only petrol retailer to confirm before Monday that it would definitely pass on the 2p cost to drivers, while many of its rivals, including some of the big supermarket chains, said they would be ensuring that their fuel prices "remained competitive".

The AA has criticised the government's move, highlighting that petrol prices have risen steeply in line with the oil price, which surged to record highs past $83 a barrel last week.

Meanwhile, the Freight Transport Association (FTA) argues the 2p increase will lead to the annual operating costs of one 44-tonne articulated lorry rising by 870 to 35,600.

At 50.35p a litre from 1 October, the duty paid on diesel in the UK is the highest rate in Europe, where the average level is 22.7p a litre.

"Fuel represents a third of the operating cost of many lorries and significant increases in fuel prices are bad news for transport and thus for customers," said Geoff Dossetter, FTA director of external affairs.

HAVE YOUR SAY
I cannot see this tax rise as anything more than an attack on those who are trying to make ends meet
Alexander Richardson, Dunfermline

He argues the rise is a tax on industry that gets filtered down to consumers.

"Road transport costs constitute an ingredient in the price of almost everything we eat, drink and use every day and it is essential that we contain those costs as far as we are able."

'Environmental signals'

Stephen Joseph, executive director of the Campaign for Better Transport, said the rise was welcome, provided the extra money raised was used to improve public transport and "other measures that will give people real travel choices".

A Treasury spokesman said the tax rise sent "the right environmental signals in our fight against climate change".

"After these changes, by 2010 main fuel duty rates will be 11% lower in real terms than they were in 1999," he said.

"The changes were made alongside reforms to Vehicle Excise Duty that cut rates for less polluting vehicles, and a number of measures to support hauliers, which they have welcomed."

The planned fuel tax increases come seven years after protests at refineries against fuel tax levels in 2000 left Britain struggling for petrol supplies.

VIDEO AND AUDIO NEWS
The government has defended the rises in petrol duty



SEE ALSO
UK fuel prices reach new record
27 Apr 06 |  Business
Petrol pump price set to reach 1
17 Jul 06 |  Business
Fuel crisis post mortem begins
16 Sep 00 |  UK News
Weak dollar holds oil prices firm
28 Sep 07 |  Business
Fuel costs hurt Thomas Cook in UK
31 Aug 07 |  Business
MPs call for cheap fuel rejected
25 Jun 07 |  Highlands and Islands

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