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Protest over £3bn fuel tax windfall
By Robert Winnett
Last Updated: 1:07am GMT 29/10/2007

The sharp rise in the price of North Sea oil this year will generate enough to fund a 6p cut in fuel duty

Gordon Brown is under pressure to suspend rises in fuel duty after it emerged that the Treasury is set to pick up an unexpected £3 billion tax windfall from the soaring price of oil.

Farmers and road hauliers threatened the Prime Minister last night with nationwide fuel protests in the run-up to Christmas unless the Government passed on some of the extra income to motorists. The price of oil has risen by 50 per cent this year, with the AA predicting that the cost of a litre of petrol will pass through the £1 barrier for the first time in the next two to three weeks.

A litre of diesel hit a record high of more than £1 last Friday. Despite this, ministers have pushed ahead with a 2p rise in petrol duty this month and are planning another 2p rise in April, followed by yet another increase in 2009.

According to an analysis by the accountants Grant Thornton, the sharp rise in the price of North Sea oil this year will generate an extra £3 billion for the Treasury – enough to fund a 6p cut in fuel duty.

David Handley, the chairman of Farmers for Action, which organised the fuel blockades in 2000, said last night: "It looks like we may well take to the streets again. We are now in serious dialogue. If something is not done imminently, Gordon Brown is going to have a bloody nose. The run-up to Christmas is when something will be done."

Roger King, the chief executive of the Road Haulage Association, said his members were furious at the Government's "twisted logic" on fuel prices.

He added: "The Government is already getting significant amounts of money from north sea oil price rises they hadn't budgeted on, so why can't they leave fuel duty alone?"

Earlier in the year, the Treasury forecast that the oil price would average $68 a barrel this year. This would enable the Government to raise £7.5 billion from various taxes levied on North Sea oil. However, the price of oil has risen by almost 50 per cent since the beginning of the year and is now above $85 a barrel. Experts believe it will continue rising. At current levels, the price rise will raise an extra £3 billion annually.

Last year, the Government announced it would begin increasing fuel duty again after freezing the tax following sharp rises in the price of oil.

Sheila Rainger, the head of campaigns for the RAC Foundation, said: "With the vast increase in the price of crude oil there should be a variable part of fuel duty which can be cut to absorb some of the price rises for motorists."

£3 billion tax windfall