Fuel tax cut in UK among lowest in Europe, RAC says

·4 min read
Woman using petrol pump
Woman using petrol pump

The UK has given some of the least generous support to help drivers with high fuel costs among countries in Europe that have taken action, the RAC has said.

The motoring group said that out of 13 European nations that have cut tax on petrol, only Luxembourg has done less.

The UK cut fuel duty by 5p a litre in March, but the RAC says this looks "paltry" when compared to elsewhere.

The government says the duty cut will save the average driver £100 a year.

UK petrol prices have hit record highs this year, although they have started to fall back in recent weeks.

Fuel prices have increased sharply because the price for crude oil, which is used to make petrol and diesel, has gone up. Oil prices jumped following Russia's invasion of Ukraine in February, but they had already been rising as demand rose following the lifting of Covid restrictions.

In the Spring Statement in March, the government announced a 5p-a-litre cut in fuel duty to help motorists, but the RAC said the UK was "languishing near the bottom of the table of the 13 countries that have actually done something to help with the price of fuel".

It said Germany had taken the equivalent of 25p a litre in tax off per litre of petrol, Italy 21p, Portugal 16p, and both Ireland and the Netherlands had cut duty by nearly 15p.

Other governments have introduced fuel discounts that take effect when motorists are paying at forecourt tills, with Spain cutting prices by about 17p a litre and France 15p.

The RAC said that of 15 European Union countries that have not taken action to cut fuel prices since March, all but six already charged less fuel duty than the UK, even after the 5p-a-litre cut.

While petrol prices have begun to fall in recent weeks as wholesale costs decline, the RAC says UK's average price of 186p a litre makes it the joint second most expensive country behind Finland (190p) and level with Denmark (186p).

"This analysis lays bare an uncomfortable truth for the UK government - that compared to other European countries, it's pretty much done the least to support drivers through the current period of record high fuel prices," said RAC fuel spokesman Simon Williams.

'Too little, too late'

"UK pump prices might be finally starting to fall, but the reductions so far are too little and too late, given the massive wholesale price drops retailers have been benefiting from for nearly two months.

"Drivers, many of whom depend heavily on their vehicles, need more help and they need it now."

Speaking to the BBC, Mr Williams said that tax accounted for about 45% of the cost of a litre of petrol, through fuel duty and VAT.

"This is why we wanted the government to go further to lower the prices for drivers because it clearly has the scope and of course it's benefitting incredibly from the VAT take because the higher the wholesale price goes the more the chancellor collects."

He added that those driving in Europe on holiday this summer could be "pleasantly surprised when they come to fill up" as many fuel prices will "far lower" than in the UK.

Graphic showing what makes up the cost of petrol
Graphic showing what makes up the cost of petrol

A government spokesperson said: "We're helping households now through a £37bn package of support - protecting eight million of the most vulnerable families with direct payments of £1,200 this year, and providing additional payments to pensioners and disabled people.

"We also introduced our biggest ever cut to fuel duty, saving the average UK car driver around £100, van driver around £200 and haulier over £1,500. This is in addition to saving the typical employee over £330 a year through our National Insurance cut and allowing people on universal credit to keep £1,000 more of what they earn."

Earlier this year the government asked the UK's competition watchdog, the Competition and Markets Authority (CMA), to investigate the fuel market amid concerns the 5p cut in fuel duty was not being passed on to consumers.

The CMA found the cut had been passed on to motorists, but it said it would investigate petrol and diesel pricing after it found "cause for concern in some parts" of the industry, particularly a sharp rise in prices once fuel had been processed by oil refineries.