Andy Mayer, energy analyst at free market think tank the Institute of Economic Affairs, commented on rising fuel costs
July's inflation figures show a 44 per cent annual increase in the cost of motor fuels. Pump prices are currently 170-210p, putting a strain on both household and business finances.
The government cannot control global oil prices, or quickly fix twenty years of running down UK industry. But they can cut punitive taxes.
Fuel duty at 53p a litre is one of the highest carbon taxes in the economy. It could be reduced to 20p while still retaining a fair environmental signal.
VAT is applied to fuel duty adding 11p to pump prices. This double taxation could end tomorrow.
Removing 44p to address the 44 per cent rise in pump prices would cut the rise to around 20-25 per cent, dependent on future wholesale prices.
This would cost the Treasury around 11.5bn in 22/23* but save households an average 650 each.
Notes to editors
Contact: media@iea.org.uk / 07763 365520
IEA spokespeople are available for interview and further comment.
https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/fuel-duties/
*Calculation assumes Sept 1st cut, reduction based then on 7 months and includes 20 per cent VAT cut
https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/july2022
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems, and it seeks to provide analysis in order to improve the public understanding of economics.