Fuel price to yo-yo as duty goes up and VAT goes down

While the AA complain that the drop in VAT announced in yesterday’s Pre-Budget Report will be cancelled out by the corresponding hike in fuel duty, there has at least been some good news for fuel prices which fell over the weekend.The Guardian reported that Morrisons cut the price of unleaded petrol to 89.9p a litre and diesel to 105.9p.Total, Asda, Sainsbury’s and Tesco were quick to follow suit.Edmund King, AA president said: “The Chancellor is giving with one hand and taking away with the other. By increasing fuel duty whilst reducing VAT shows that the Chancellor is playing roulette with global fuel prices and could lose his gamble. It is a very big gamble as there are 32 million motorists out there and most of them have a vote. If the global price of oil increases this hike may come back to haunt the government. It also means that when VAT reverts to 17.5 per cent the motorist will be hit at the pumps once again.”According to the AA breakdown:The 2 per cent cut in VAT will save 1.72p on a litre of unleaded at the pump.Based on the current average price petrol being 92.88p. That is 50.35 fuel duty and 13.83 VAT @ 17.5 per cent.At the new VAT rate of 15 per cent to be introduced next Monday (1 December 2008), that would be 50.35p fuel duty and 12.11p VAT.Difference = 1.72 ppl.The fuel duty increases of 2p per litre also to be introduced on Monday, will mean the saving on VAT will be lost, and the Treasury would actually gain 0.5 pence per litre.

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