Once again we are seeing record fuel prices. The government seems loathe making any budgetary adjustment in order to keep petrol prices down in these very difficult times. The Conservatives, when challenged, have claimed the country cannot afford a tax cut while the country attempts to balance the books.
Of course the claims made by the government and the treasury are wrong. As oil prices rise, so does the amount of VAT collected by the government. They had suggested when in opposition to balance any oil price rise by also reducing excise duties, however they only suspended duty rises while at the same time raising VAT.
The actual cost of oil per litre is something like 45p, the cost of refining 1.5p, the retailer margin 7p. The real culprit in rising fuel prices is the Government. Of the £1.34per litre of unleaded fuel, some 80p goes to the Government in the form of VAT and Excise duties. The higher the price of oil, the more the Treasury receives in VAT. If oil costs go to 50p, then VAT would rise also by around 2p, so in effect you would be paying 7p more for your fuel.
The Government sets its budget every year and does not account for a rise in oil prices, so in effect they are getting a surplus in their budget. Not to mention that all government vehicles cost more to run, it also adds to the pressures on inflation and further weakens our currency.
It is time our Government started to see the big picture here and get their heads out of their balance sheets.
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