Rachel Reeves set to rake in £1billion further a yr in VAT from drivers because of hovering worth of petrol
Rachel Reeves is raking in the equivalent of as much as £1billion extra a year in tax from drivers thanks to soaring pump prices, according to analysis.
The study found the Chancellor will net around £20million extra a month in VAT on petrol sales if average pump prices remain around their current level.
And for diesel she will get up to an extra £71million, based on current prices compared to before the Iran conflict started.
The analysis was based on HMRC data, which shows the UK consumes 1.55billion litres a month of petrol and 2.4billion litres a month of diesel.
Figures from the RAC show average petrol pump prices have rocketed more than 7p since February 28, when the war started.
It means the Treasury will net nearly 1.5p a litre in VAT, or around £22.6million a month.
And diesel has jumped by more than 15p a litre, netting the Chancellor an extra 3p a litre in VAT, or up to £76million a month. Over a year, this would combine to make £1.1billion.
Campaigners said it showed Ms Reeves could afford to spare drivers more pain at the pumps and at least delay her hated hike in fuel duty, which kicks in from this September.
Amid spiralling pump prices sparked by the war in Iran, Chancellor Rachel Reeves has faced calls to spare drivers further pain at the pumps by scrapping her fuel duty hike (file photo)
John O’Connell, chief executive of the TaxPayers’ Alliance, said disclosure of the size of the VAT windfall the Chancellor is in line for will drive motorists ‘round the bend’.
He added: ‘With the economy set to take serious damage from the crisis in the Middle East, it is unacceptable that the big winner will be the Treasury.
‘Reeves needs to give taxpayers a break and maintain the current rate of fuel duty beyond September.
‘Ideally she would go further and temporarily stop charging VAT on top of fuel duty, only charging it on the price of fuel itself to stop the tax upon a tax.’
Howard Cox, founder of the FairFuelUK campaign group, said: ‘The government’s traditional cash cow continues to be fleeced with VAT flooding in like an unstoppable tsunami, and all due to rocketing pump prices.
‘Fossil-fuelled road users want the Chancellor to scrap any plans for a Budget Fuel Duty Rise.’
AA president Edmund King said: ‘The surge in pump prices has generated a VAT windfall for the Treasury. We ask that the scrapping of the 5p fuel duty cut be delayed for at least six months.’
The Chancellor said earlier this week that she would be ‘loath’ to scrap her 5p a litre fuel duty hike, which will add more than £3 to the cost of a fill-up, despite the extra VAT windfall she’s in line for.
But she and Sir Keir Starmer have left the door open for a U-turn by saying the policy is ‘under review’, suggesting it could be scrapped if the Iran conflict drags on and pump prices continue to rocket.
During a heated Prime Minister’s Questions this week, Tory leader Kemi Badenoch repeatedly urged Labour to scrap the hike and accused Sir Keir and Ms Reeves of treating drivers like ‘cash cows’.
The Tories have repeatedly urged Labour to scrap the hike while Reform UK have pledged to reverse it if they win the next election.
The RAC’s figures last night showed average petrol pump prices have soared by 7.32p a litre to 140.15p a litre since the Iran conflict started. Diesel has jumped 15.85p to 158.23p a litre.
A Treasury spokesman said: ‘We have the right economic plan – we have extended the 5p fuel duty cut from this month to the end of August to support drivers.’
