'Fuel duty is applied first and then VAT is charged on top of it. So when the Government choose to increase fuel duty, they are also increasing the VAT paid on that tax—literally - a tax on a tax. This means what they present as a 5p rise is not really 5p in practice, but closer to 6p at the pump—a hidden double tax built into the system, taking more from every driver, every business and every household.
We saw this argument tested just this weekend. The Labour Energy Secretary, Rt Hon Ed Milliband MP, was asked directly about the soaring cost of fuel and his clear instinct was simply to point to global events, external pressures and anything other than the decisions being made here at home by Whitehall. But he was confronted on the BBC about a simple, undeniable fact: a breakdown of the price of a litre of petrol showed that fuel duty alone accounts for around 38% of the cost and, once VAT is added on top, that more than half of what drivers pay at the pump is tax—more than half.
Of course global factors play a large role and of course wholesale prices fluctuate, but when over half the price at the pump is actually made up of taxes set by this Government, Ministers cannot hide purely behind these external circumstances. They cannot simply blame global markets and ignore their own policy choices. And they certainly cannot claim to be easing the cost of living while actively increasing the tax burden built into every litre of fuel. The consequences ripple through the entire economy.'
Greg Smith MP (Con) Fuel Duty - Hansard - UK Parliament
I am very keenly aware fuel duty rates are, rightly, a major issue for my constituents living in rural areas without the public transport options available in towns and cities. For us, cars and vans are not a luxury but a crucial component of daily lives and for many a lifeline. Therefore, maintaining fuel duty at current levels and not, as Labour plan, increasing it - would absolutely help support households and businesses, especially with the cost-of-living crisis showing no sign of abating under this Labour Government alongside this disastrous geo-political situation for our wider energy sector.
As my colleague, Harriet Cross MP said in the Opposition Day debate on Fuel Duty on the 18th of March,
‘People in our rural communities rely on cars more than anywhere else. We cannot rely on buses, because they are not reliable. We cannot rely on trains, because half of the time they are not there. We cannot rely on tubes, because we do not have any near us. Cars are the lifeblood of rural communities. We would be stuck without them, and therefore they are vital.’
However, at the Autumn Budget 2025, the Chancellor, Rachel Reeves, announced that from April 2027, the fuel duty freeze which has been in place for 16 years will be scrapped along with the 5p cut put in place under the previous Government and fuel duty will begin to rise with the Retail Price Index.
On top of this, the Chancellor chose to introduce a pay per mile tax on electric vehicles which is set to take effect from 2028/29 with an initial rate of 3p per mile that is set to cost the average driver an extra £255 a year. This charge will also rise in line with inflation which is pure madness at any time. I completely agree with my colleague the shadow Chancellor, Rt Hon Mel Stride MP , who has said "if you own it, Labour will tax it. It would be wrong for Rachel Reeves to target commuters and car owners in this way just to help fill a black hole she has created in the public finances".
The RAC's Fuel Expert Simon Williams has said that "the cost of simply keeping vehicles on the road has become a significant financial challenge" and the AA's President has described the measures as a "poll tax on wheels". I am also aware of Howard Cox's - the founder of FairFuelUK, comments that the fuel duty freeze has "been of immense benefit to Britain's motorists and has significantly strengthened the Treasury's finances due to the consequential reduction in inflationary pressure". I have backed the action from FairFuelUK for a number of years and it’s vital they continue to make their case.
Unfortunately, as a result of this Chancellor's economic mismanagement and refusal to even consider spending cuts, the Labour Budget has proved to be a very difficult one for motorists. And now, motorists – families, businesses, workers, carers - will be even more worried about the price at the pump after oil prices spiked as a result of the Iran War, the impact the war has had on trade routes and the ongoing damage to oil refineries in the Gulf. As a result, the Official Opposition, my Party tabled a motion to force the Government into extending the fuel duty relief introduced by the previous Government in order to help consumers cope with increased pump prices. At this week’s crucial Opposition Day debate, held by the Official Opposition on the 18th of March and introduced by Rt Hon Richard Holden MP, the Shadow Secretary of State for Transport, the motion read,
That this House believes that it is wrong to increase the main fuel duty rates on 1 September, then again on 1 December 2026, with a further increase on 1 March 2027, by a total of five pence per litre, as global oil prices are rising; notes that these increases will affect drivers, farmers, businesses and other hard-working people already struggling with higher taxes and higher cost of living as a result of the Government’s economic policies; and calls on the Government to maintain the five pence per litre cut to the main fuel duty rates introduced by the previous Government beyond September 2026.
I was very disappointed but not surprised that only 2 Labour MPs bothered to turn up to the debate despite the fact that,
‘at no time since 1966 has the Labour party in government had a higher number of Members of Parliament representing rural constituencies, unless those MPs are in deep camouflage this afternoon, they appear to be showing what I would describe politely as precious little interest in the welfare of their constituents.’
My colleague Simon Hoare MP went on to point out that a fuel duty freeze would help
‘everybody in our country, but it would disproportionately benefit those whom we referred to at a certain time in our recent political history as “just about managing”. Those are not households that are supported by a raft of welfare state interventions and benefits, and they are not people who are disabled and unable to work. They are people who are doing their best and doing their bit’
Greg Smith MP added,
‘How absurd it is that, on an issue that affects each and every one of our constituents, whether they drive their own car or take the bus or a diesel-powered train, not one Government Back Bencher—not one—sought to catch your eye, Madam Deputy Speaker, to make a speech either to defend the Government’s plan to increase fuel duty this September, or perhaps even to have the backbone to stand up and oppose it.’
‘Let us ask a very simple question. When the Chancellor talks about asking those with the broadest shoulders to pay more, does she mean the care worker filling up their car to get around to their house visits, particularly in rural communities? Does she mean the self-employed delivery driver keeping our high streets alive? Does she mean the small business owner trying to make ends meet? I very much hope that she does not, but what we see on the ground, as the reality, is that those are exactly the people who will be hit hardest by this policy of increasing fuel duty.’
For every year of the last Conservative government, we found the resources to freeze fuel duty. Labour is not making the same choices, instead choosing ever higher spending.
Let's be very clear; on the 18th of March, Labour MPs failed to stand up for British motorists by choosing to vote for their fuel duty increase. As did the Greens. The Lib Dems and Reform parties also did not vote for our motion, instead choosing to abstain.
I believe this Labour Government must scrap the rise; if you agree, please do sign and share our petition – the link is here:
‘Fuel is not a luxury; it is fundamental to how the country works’
Conservative Greg Smith MP
