The Federation of Small Businesses (FSB) is calling for the Chancellor to recognise that the tax proceeds of North Sea oil will be higher due to the rise in prices. The FSB would like to see the chancellor share this windfall with hard-pressed, consumers, motorists and small business owners.
The UK's biggest business organisation has been working with accountants Grant Thornton to calculate the extra tax revenue the Government has received because of increases in oil prices over and above predictions made in the 2008 Budget.
The FSB is calling for the planned 2p per litre fuel duty increase to be scrapped and an automatic adjustor mechanism, whereby extra tax revenues from higher than predicted oil prices would automatically trigger corresponding reductions in fuel duty. The Treasury's 2008 Budget forecast assumed an oil price of $84 per barrel (pb).
According to Maurice Fitzpatrick, a tax expert at Grant Thornton:
- For every $4pb by which oil exceeds the predicted price the Treasury receives an extra £1.5 million per day;
- Deferring the planned 2p per litre fuel increase for six months would cost £550 million, but in just 50 days since the Budget on March 12 2008 the oil price averaged $108pb, giving the Treasury £450 million more in revenue than it forecast;
- The oil price is widely predicted to remain over $100pb, giving the Chancellor plenty of extra money to pass on to motorists.
John Wright, FSB National Chairman, said, "High fuel prices are crippling small business owners in every sector and in every area of the country. Those small businesses produce over half of UK GDP and employ over 13 million people. Apart from the immediate extra costs to motorists of filling up at the pumps, spiralling petrol prices also have a knock-on effect on everybody in terms of more expensive food and consumer goods.
"The Government can do something about the situation. A mechanism that automatically uses extra oil tax revenue to reduce fuel taxes would be an efficient, effective and fair way of delivering some relief to motorists of all kinds.
"Spiralling fuel prices are having a major impact on the whole of the UK economy, of which small businesses are a significant part. The money is there to help them. The question is whether the Government will act."
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