New Year fuel duty rise leaves lorry drivers facing 'a £95m hangover'

Published on 31/12/2010 17:32

CAR owners in some parts of Scotland face paying £7 for a gallon of fuel in 2011, a leading motorist organisation has warned. Soaring oil costs and government tax rises are predicted to push fuel prices to a new high this year, amid fears rural motorists will suffer most from the increases.

The 7 prediction, made by the Institute of Advance Motorists, follows an AA report suggesting that next year diesel will pass a 6 gallon average across Britain. But in Scotland, many motorists will face prices that could touch 1.54 a litre, or 7 a gallons, particularly in remote areas.

Neil Greig, policy and research director of the Institute of Advanced Motorists, said: "I can see the price of diesel potentially hitting 7 a gallon next year. It means that people are going to have to start downsizing their cars and learning how to drive more efficiently."

And concerns have been raised that a new scheme to help rural communities, which will be tested in the Highlands, will be too slow to alleviate the impact and may not go far enough.

A UK government fuel duty rise coming in today will put 0.76p on the price of a litre of petrol and diesel. The increase in VAT to 20 per cent on Tuesday will mean pump prices go up even further.

The AA estimates the two increases will add around 3.5p to the cost of a litre of petrol and diesel.

AA figures show that at present a litre of petrol costs an average of 123.98p a litre, with diesel at 128.20p. This time last year petrol was at 107.74p a litre and diesel at 109.46p.

A further increase of 1p in fuel duty in April will hit motorists further and the AA is concerned that, with the price of a barrel of oil expected to go well over $100, motorists are going to be even worse hit.

The AA has estimated that motorists - even before the two latest increases - are spending almost 10 million more a day on petrol than this time a year ago and expect this to rise to 12m.

An AA spokesman said: "The price of diesel will almost certainly average 6 a gallon in the UK, and it will be much worse for rural communities in Scotland.

"People are paying the price for the government wanting to use fuel duty and VAT to fill the deficit and greedy oil speculators on the world markets."

Brian Madderson, chairman of RMI Petrol, which represents the 6,000 independent forecourts across the UK, said he did not believe the government realised the impact of its decisions. He pointed out that 500 forecourts a year are already shutting.

"This is the biggest increase in years as a result of the VAT rise on top of the fuel duty rise," he said. "We have to remember there will be another fuel duty rise in April too.

"It is all very well for (Environment Secretary] Chris Huhne to go on about the environment and windmill farms, but this increase is going to hurt people. There are 25 million fossil fuel vehicles in this country, which make our everyday lives easier and bearable."

The Freight Transport Association (FTA) said today's fuel duty rise would leave the freight industry "with a 95m hangover".

Simon Chapman, the FTA's chief economist, added: "Diesel is not an optional extra for industry. It is essential to keep shops stocked and businesses supplied with materials.

"Rises in fuel commodity prices have already left operators facing diesel prices 9p per litre higher than a year ago - adding 3,800 per year to the bill of running an articulated truck. This latest fuel duty increase, together with those previously introduced this year, will add a further 1,200 per year."

There ware also fears about the impact the increases will have on tourism, one of the major drivers for economic recovery for the Scottish economy.

The Scottish Government has already made it clear it opposes new tax rises.

A spokesman said: "Action is needed to deal with the impact of rising petrol prices. The introduction of a fuel duty regulator by the UK government would enable any extra tax raised through higher petrol prices to be used to fund a fuel duty cut.

"We also believe a discount on fuel duty should be levied in rural and island communities, two areas hardest hit by rising fuel prices."

There was also pressure in Westminster for a change of strategy, with question marks over plans to bring in a regional scheme to help lower fuel duty for rural areas. This scheme will be tested out in the Highlands contituency of the Liberal Democrat Chief Treasury Secretary Danny Alexander.

However, the AA yesterday claimed this would take too long to introduce and roll out and would "only have a limited impact".

Labour Dumfries and Galloway MP Russell Brown, pointed out the Lib Dem scheme would probably not include most of his constituents even though he represents a very rural area.

SNP Westminster transport spokesperson Angus MacNeil MP described the situation as "highway robbery".

He said: "It's a national scandal that, in an oil-rich country like Scotland, we are paying the highest fuel prices in Europe, and this highway robbery must stop.

"We need a New Year resolution from the government to bring down fuel costs."

Last night, a Treasury spokeswoman defended the rise in VAT and fuel duty. She said: "In order to address the country's record budget deficit, it is necessary to implement the fuel duty increases already set and legislated for. Tough decisions are unavoidable, and the government has been clear that the burden of deficit reduction will have to be shared."

She added: "The government's overriding priority is to reduce the deficit in a fair and decisive way. At the June Budget, the Chancellor announced that on 4 January the main rate of VAT will rise to 20 per cent. This will generate over 13 billion a year of extra revenue over the course of this parliament."