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Government Taxes Fuelling Disruption

Article supplied by MoneySupermarket.com

A survey conducted by moneysupermarket.com has revealed that rising fuel prices have forced a staggering 84% of British motorists to alter their driving habits.

This comes on the back of a report by The Mail Online which shows that petrol prices will increase by a further 7 pence per litre in the early part of this year thanks to VAT and fuel duty hikes imposed by Chancellor George Osborne.

Survey Results

Moneysupermarket conducted its first motoring survey looking into the effects of rising fuel prices in October 2010 when the first fuel duty increase was imposed. This revealed that 65% of motorists believed that the price increase had affected them, with 69% admitting that they had changed their driving habits as a result.

The same survey was conducted in January 2011 following the VAT increase to 20%. This revealed that 67% of drivers now admitted that fuel increases have had an affect, while an unbelievable 84% admitted that they had been forced to alter their driving habits. Of this 84% of the survey respondents, 5% admitted that they had even been forced to give up driving altogether.

The VAT increase has seen retail prices for unleaded petrol rise to an average of 127.1 pence per litre across the country which is a jump of 18.4% on the same time in 2010.

Head of banking at the company, Kevin Mountford, commented:

"With the effects of the VAT rise taking hold, and the latest inflation data highlighting the pressure on our wallets, fuel is another day to day cost that people are really struggling with."

Further Increases

Despite the obvious impact that the fuel increases have already had on motorists, there are set to be further fuel duty increases of 3.5% introduced in April as the government attempts to address countries severe debts left by the previous Labour government.

This move has been generally condemned by business groups, with John Walker, the chairman of the Federation of Small Businesses (FSB), warning of the effects that these fuel increases will have on small businesses and has called for the government to increase the threshold at which companies have to register for VAT:

"Increasing the threshold at which companies have to register for VAT will put almost £900m back in the pockets of small businesses. Without this, small firms will struggle to bounce back as the spending cuts start to bite."

The FSA believes that unless this action is taken the fuel increases will impact on the countries recovery from the recession as additional expenses incurred by businesses will ultimately be passed onto consumers.

This viewpoint has been supported by the London Major Boris Johnson who has called for his Conservative colleagues to stick to their pre-election promise of introducing a 'fuel duty stabiliser' which would result in fuel prices being unaffected by VAT increases.

The Conservative stalwart commented:

"Petrol is cheaper in virtually every other European country than it is in Britain…Whatever the reason for the recent spikes, we cannot get around the fact that the spikes are jabbing the consumer all the more painfully because the Treasury takes about 60% of your fuel bill in excise."

Despite these comments, Mr Osborne has made it clear that the fuel duty increase - which will contribute an additional £13 billion per annum to the UK economy - would still go ahead.

This is despite the threat of fuel blockades similar to those experienced in 2000 - when unleaded fuel cost an average of 80 pence per litre - which would cause country wide disruption.

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