HM Customs and Excise 17
17 March 1998
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FUEL DUTIES INCREASED TO IMPROVE URBAN AIR QUALITY AND REDUCE
GREENHOUSE GAS EMISSIONS
The Chancellor has announced that from 6pm tonight the tax (duty plus
VAT ) on road fuels will increase in line with the Government’s commitment
to raise road fuel duties by at least 6 per cent a year above inflation.
The increases in this Budget will discourage unnecessary journeys and
encourage fuel efficient vehicles. They are expected to produce carbon
savings of about one million tonnes per year by 2001. Additionally,
bringing forward the escalator increases to March each year should produce
further carbon savings of 0.7 million tonnes per year.
The Chancellor also announced today his intention to change the structure
of taxes on road fuels over time to improve the quality of air in urban
areas, through two broad objectives:
to tax petrol and diesel more fairly, based on the energy and carbon
content. This means that the tax on a litre of diesel should be higher
than that on petrol.
to encourage all users of diesel to switch to ultra low sulphur diesel,
a significantly cleaner fuel.
As a first step to achieving these objectives, the tax (duty plus VAT) on
leaded and unleaded petrol will rise by 4.9p a litre and 4.4p a litre
respectively. Ordinary diesel will go up by 5.5p a litre. The difference
in duty between leaded and super-unleaded petrol has been cut from 1.5p a
litre to 0.5p a litre and the duty on leaded petrol has been increased by
almost 0.5p a litre more than that on unleaded.
The difference in duty between diesel and ultra low sulphur diesel is being
increased from 1p to 2p. At the same time, the specification of ultra low
sulphur diesel is being tightened to ensure that this fuel continues to
offer significant improvements in urban air quality.
The duty on road fuel gases - which offer environmental benefits over petrol
and diesel - is frozen again. This move complements the change to the company
car tax regime to ignore the cost of conversion to gas and will further
encourage gas powered vehicles.
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DETAILS
The duty rates are as follows:
Old rate New rate Increase Increase
(pence) (pence) (pence) (per cent)
Leaded petrol per litre 45.10 49.26 4.9 inc. VAT 9.2
per gallon 205.03 223.94 22.2 inc. VAT 9.2
Unleaded per litre 40.28 43.99 4.4 inc. VAT 9.2
petrol per gallon 183.12 199.98 19.8 inc. VAT 9.2
Super-unleaded per litre 43.60 48.76 6.1 inc. VAT 11.8
petrol per gallon 198.21 221.67 27.6 inc. VAT 11.8
Conventional per litre 40.28 44.99 5.5 inc. VAT 11.7
Diesel per gallon 183.12 204.53 25.2 inc. VAT 11.7
Ultra low per litre 39.28 42.99 4.4 inc. VAT 9.4
sulphur Diesel per gallon 178.57 195.44 19.8 inc. VAT 9.4
Gas oil per litre 2.58 2.82 0.2 exc. VAT 9.3
per gallon 11.73 12.82 1.1 exc. VAT 9.3
Fuel oil per litre 2.00 2.18 0.2 exc. VAT 9.0
per gallon 9.09 9.91 0.8 exc. VAT 9.0
AVGAS per litre 22.55 24.63 2.4 inc. VAT 9.2
per gallon 102.51 111.97 11.1 inc. VAT 9.2
Road fuel gas per kg 21.13 21.13 0 0
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NOTES FOR EDITORS
1. The continuing commitment to a 6 per cent increase for road
fuels is part of the Government’s policy to reduce emissions of
greenhouse gases, and recognises the environmental and other costs
attached to road use. Road traffic is the fastest growing source of
carbon dioxide emissions which cause climate change.
2. Conventional diesel has a greater energy and carbon content
relative to petrol. The higher duty increase for diesel is partially
to offset this advantage, and also reflects the fact that using diesel
is worse than petrol for urban air quality. Burning diesel produces
more particulates (small particles of black smoke and other pollutants)
and nitrous oxide emissions than petrol (both components of the National
Air Quality Strategy). Similarly, the duty rate on superunleaded petrol
has been increased by more than unleaded to reflect the adverse effects
of benzene, a known carcinogen. The leaded rate has also been increased
by more than unleaded to reflect the harmful emissions arising from
leaded petrol.
3. The preferential duty rate for ultra low sulphur diesel was
introduced on 15 August last year at 1 pence less per litre than
conventional diesel. This differential has now been increased to 2 pence
per litre to further encourage manufacture and use of this cleaner fuel.
ULSD produces lower levels of particulates than conventional diesel To
ensure the environmental benefits, the specification for the lower duty
rate has been extended to include additional criteria related to density
and distillation.
4. The increase in duty on gas oil and fuel oil is in line with
the increases on road fuels. The duty on road fuel gases (liquefied
petroleum gas and compressed natural gas), has again been frozen due
to the environmental benefits these gases offer over diesel and to a
lesser extent, petrol. The widened duty differential with conventional
diesel offers a clear incentive for high mileage fleets, vans and
buses to convert to cleaner gas power and will help to offset the cost
to motorists of vehicle conversion. In addition, conversion costs will
not be taken into account when calculating income tax on car benefit
charges (see Inland Revenue Press Notice 6).
5. The combined revenue effect of these duty increases on an
indexed basis is additional yields of 1265 million pounds in 1998/99,
1410 million pounds in 1999/2000 and 1640 million pounds in 2000/01 on
an indexed base, and 1670 million pounds on a non-indexed base in
1998/99. The impact of these changes on RPI is estimated to be
+0.28 per cent.
6. Details for traders are available in Budget Notice BN 85/98.
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