Ed Balls to force vote on reversing rise in VAT on petrol, as industry and motoring groups demand action over cost at pumps
George Osborne will come under fresh pressure to help motorists this week when Labour forces a Commons vote aimed at reversing the recent VAT rise on petrol.
A week ahead of the chancellor's second budget, ministers are facing a chorus of demands for action from motoring organisations and industry, as the Middle East crisis forces up prices at the pumps. Last week petrol prices were averaging �6 a gallon.
Osborne has already hinted strongly that he will drop a planned 1p a litre increase in fuel duty, due to come in next month. Ministers have also been examining the feasibility of a fuel stabiliser to keep prices in check. This would reduce duty when fuel prices go up, and raise it when they go down, insulating motorists, hauliers and businesses from swings in the oil price.
But as it seeks to blame the government for what it calls a "cost of living crisis", Labour will use a Commons debate on Wednesday to demand that Osborne goes further by reversing, without delay, the 2.5% rise in VAT on petrol that came into effect in January. The rise has added �1.35 to the cost of filling up a 50-litre tank.
The shadow chancellor, Ed Balls, is calling on Lib Dem MPs to back the Labour move. "Osborne doesn't even have to wait until budget day; he can do it tomorrow, he can do it on Wednesday," Balls said in an interview with the BBC's Politics Show. "He can act now, give some relief to motorists and hauliers, then look at the duty in the budget, then look at these issues of world oil prices in the next few weeks. But don't say there's nothing you can do. The VAT rise he could reverse immediately, and I think he should."
Research by the House of Commons Library shows that the rise in VAT is adding 2.71p to the cost of a litre of unleaded petrol, assuming a pump price of 130p.
The transport secretary, Philip Hammond, last week dismissed the impact of the VAT rise on petrol prices as a "spurious argument". "People often talk about the VAT on fuel and the increase in VAT; the fact is that if people find they are spending more on fuel they tend to be spending less on something else across the economy," he said.
The VAT rise on fuel will generate around �700m in extra revenue for the Treasury this year. Labour says the VAT rise can be reversed using the �800m extra the Treasury is receiving from the bank levy.
Source: http://www.guardian.co.uk/uk/2011/mar/13/petrol-price-rise-george-osborne
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