Government denies VAT windfall on fuel

On July 30th an 'epetition' closed with 1,290 signatories asking the Government to spend its VAT windfall - received thanks to massive increases in the price of fuel - on transport or renewable energy and now Number 10 has issued a response.

The petition owner, Peter Lawton of What Car?, stated:

"For every penny that pump prices rise, HM Revenue and Customs takes an extra £200,000 a day, nearly £73 million a year.

At June 2007 pump prices VAT raised £19 million every day, the equivalent of more than £7 billion a year.

At June 2008 pump prices VAT raised £25 million a day, the equivalent of £9 billion a year.

We believe extra VAT revenue should be spent on renewable energy or improving transport with spending on roads, infrastructure and public transport."

The Government's response claims that increases in VAT received on fuel are usually offset by reduced consumer spending on other 'luxury' goods.

Number 10 also states that, while it acknowledges the financial pressure families and businesses are under, it has committed to maintain fuel duty at its current value for this year.

Taking inflation into account, the 50.35 pence per litre flat rate is said to be 17 per cent lower than in 1999, while the UK's 17.5% VAT rate is the third lowest in the EU.

Though the response does not mention spending on transport or renewable energy, it refers to a UK-hosted summit of oil producers and consumers in London later in 2008 to discuss "inefficiencies in the international oil market", which may be used as a forum to promote the development of alternative energy sources.

Shane O' Donoghue