Fuel costs threaten fragile recovery

Fuel taxes are simply a tax on moving people and goods – one of the most basic requirements for creating wealth in any economy.

Punitive fuel taxes, therefore, are a very real threat to this country’s recovery from the recession.

One could have hoped that a new government would see the folly of taxing the movement of goods and people. Especially when the connection between pump prices and inflation is also so obvious.

Fuel pump pouring money

When fuel prices go up, it is inevitable that the cost of almost everything we buy will also go up as raw material and delivery costs increase.

Fuel taxes are also a very blunt instrument.
  • Inevitably they hit hardest at those parts of the country that are furthest from the centres of population and the main markets.
  • The Joseph Rowantree Foundation has also pointed out that high fuel costs impact hardest on low-income families.

The distance from the Home Counties to the channel ports is a lot less than the 500+ miles from Aberdeen. Thus, the amount of tax paid by businesses in the Aberdeen area, in servicing markets in Europe is much greater, than for those in David Cameron’s back yard. Indeed, with some justification, it could be argued that fuel tax actually discriminates against businesses and families who live in the more remote parts of our island.



When viewed from the region that has been largely responsible for the economic miracle of producing the oil in the first place, that is a particularly bitter pill to swallow.

It is time for a re-think.

Governments need to kick their addiction to fuel tax as an easy ‘cash cow’ for the Exchequer. It is damaging the efficiency of our businesses and hitting hardest at low-income families.

Footnote:

If it wasn’t for fuel tax, a litre of fuel would cost you around 47p plus VAT. So, the tax you pay increases the price of the fuel by around 270%.
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