Treasury 'must end fuel tax plan'

Business leaders have called on the Treasury to scrap plans to introduce a 2p increase in fuel tax in the Autumn as the price at the pump surges.

The British Chamber of Commerce said businesses were being pushed "to the absolute edge" by the costs.

The comments came as the price of a barrel of oil reached hit a record $135 - twice what it cost a year ago.

The average UK price for a litre of unleaded petrol is now about 114p, while diesel costs, on average, 126.4p.

The path of UK petrol and diesel prices

This makes petrol 18% more expensive than a year ago while the cost of diesel on the garage forecourt is 30% higher.

The fuel tax rise, announced in last year's Budget, had been due to come into effect on 1 April but will be postponed due to soaring crude oil prices.

'Massive windfall'

UK'S CHEAPEST & MOST EXPENSIVE FUEL

• Cheapest unleaded: 107.9p (Gateshead)
• Most expensive unleaded: 125p (Northampton)
• Cheapest diesel: 117.9p (Mansfield)
• Most expensive diesel: 138p (Hexham)

"Something needs to be urgently done or increasing numbers of companies will be left with no choice but to pass extra costs onto customers," said the BCC's policy head, Chris Hannant.

He said: "Sending a positive message to business would make a huge difference and the government should start by announcing that they are scrapping the next 2p hike in fuel duty.

"The Treasury is already receiving a massive windfall from above expectation oil prices, which makes any extra fuel levy totally unjustifiable."

The AA said another $5 leap in the oil price could add a further 2.5p to the price at the pump.

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"The threat of even higher prices in the pipeline will perch like a vulture above UK forecourts waiting to pick an even bigger hole in the pocket of drivers and consumers," AA president Edmund King said.

There are hopes the oil price can be brought down by oil -producing nations increasing their output.

Energy Minister Malcolm Wicks said the government was being "very active" in talks to try and achieve this.

But he also said a surge in fuel prices may encourage people to take the issue of energy efficiency "more seriously".

Friends of the Earth has said the Treasury must push ahead with the tax rise, saying road transport was responsible for nearly a quarter of UK carbon dioxide emissions.

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