The latest analysis reveals that Chancellor Rachel Reeves’ proposed fuel tax increase would make millions of drivers in the UK the most heavily taxed in Europe.
Research indicates that diesel drivers in the UK are currently paying an average tax of 85p per litre, which is tied for second-highest with Germany and just behind Denmark at 88p.
However, this tax is set to rise to 91p per litre once the Chancellor’s new fuel duty hike takes effect, positioning UK drivers as the most burdened in Europe.
As for petrol, UK drivers currently rank twelfth in terms of taxes, paying 79p per litre among the 29 European countries considered in the study.
This ranking would climb to eighth place, with taxes increasing to 85p per litre, according to findings from the RAC Foundation.
This development coincides with nearly £500 million in additional VAT revenue collected by Ms. Reeves due to soaring pump prices, exacerbated by the conflict in Iran, over a period of less than three months.
It piled pressure on her today to ditch her hated 5p a litre fuel duty hike, which kicks in from September, and use the windfall to help pay for it.
Richard Holden, the Tories’ Shadow Transport Secretary, said: ‘Labour’s fuel duty hike will hammer drivers already squeezed by rising costs and make Britain one of the most expensive places in Europe to drive.
Petrol and diesel taxes will increase this September under planned hikes announced by Chancellor Rachel Reeves last year
Richard Holden, the Tories’ Shadow Transport Secretary, said Ms Reeves’ planned hike will ‘hammer’ private drivers and businesses
The cost of filling up has surged since the Iran war but a fuel duty increase would add another £3 to the average cost of filling a family car
‘Instead of helping motorists with the cost of going to work or the shops, Rachel Reeves is treating drivers like a cash cow to bankroll Labour’s ballooning welfare bill.’
Tory MP Greg Smith accused Ms Reeves of ‘ripping off drivers at the pumps with extortionate tax hikes’, adding: ‘Labour needs to understand how vital cars are to people’s everyday lives and reduce the tax burden.
‘Unless they think every motorist has “the broadest shoulders”, in which case they are even more out of touch with reality than we thought.’
Howard Cox, founder of the FairFuelUK group, which has campaigned for years to keep fuel duty low, said Ms Reeves should spike the hike if she wants to achieve her economic growth ambitions.
He said: ‘The current cost of petrol, and particularly diesel, is crippling motorists’ and small businesses’ ability to spend in the wider economy.
‘Any more fuel tax hikes are both economically and politically suicidal.
‘When will these ignorant Treasury politicians understand that more money in people’s pockets drives growth?’
The Tories and Reform UK have vowed to ditch the increase if they win the next election, while the Liberal Democrats have called for a 10p a litre cut in fuel duty. It is currently 52.95p a litre.
Tax, when fuel duty and VAT are combined, currently accounts for around half of the cost of filling up at the pumps.
Since the Iran war began on 28 February, drivers have shelled out an extra £2.8billion at the pumps because of higher prices, according to the RAC Foundation’s analysis.
This, in turn, has netted Ms Reeves more than £480million extra in VAT as higher prices mean the 20 per cent levy accounts for a bigger slice going into Treasury coffers.
Since the conflict erupted and the Strait of Hormuz was blockaded, which squeezed oil supplies and drove up global costs per barrel, most other countries have cut fuel taxes to relieve the burden on drivers.
By contrast, Labour has vowed to press ahead with its 5p a litre fuel tax hike, which would kick in from September and add another £3 to the cost of a fill-up.
However, there was growing speculation today that she will delay or ditch the hike next week as part of a package aimed at alleviating cost-of-living pressures on hard-pressed households.
Treasury sources said it was something that was being war-gamed.
Since the conflict started, it has become around £14 more expensive to fill the average 55-litre tank in a family car with petrol, and over £24 more costly with diesel.
Energy bills for some households have also increased, while soaring costs of diesel generally push up prices on shop shelves as the fuel is the lifeblood of the haulage industry, which tends to pass on any increase in delivery costs.
While pump prices have dipped slightly in recent weeks, petrol remains 25p a litre more expensive on average than before the conflict while diesel is 44p more costly.
The Treasury was contacted for comment.
