Budget 2017: fuel hike branded "backdoor" tax

Tuesday 08 November 2016

Treasury Minister Alan Maclean defended his plans to push up fuel tax by 2p a litre, claiming there will be environmental benefits in the rise.

The Minister was speaking to the Corporate Service Scrutiny Panel, and said the planned increase in tax in the 2017 Budget will not necessarily be converted into a rise at the pump, although he admitted that was "likely" to happen.

The Budget 2017 will be debated in mid-December, and drinkers and smokers, with cigarettes facing an 8.1% increase, or roughly 43p on a pack of 20, and alcohol going up by around 5% - more than three times the current inflation rate. Users of hand-rolling tobacco face a whopping 10% increase.

And motorists will be sharing some of their pain, with fuel also set to go up - the Treasury Minister wants to add 2p to a litre of unleaded, an increase of 4.2%, in a measure which he hopes will bring in an extra £921,000.

In total the Budget 2017 proposals are forecast to bring in an extra £2.53million next year for the States, rising to £2.95million in each of 2018 and 2019 - but despite that, the Treasury is still forecasting a deficit (not including depreciation) of £43million in 2016, dropping to £13million in 2017, before it climbs back into the black, reaching a surplus of £56million in 2019.

Yesterday Senator Alan Maclean said: "There are environmental considerations to be taken into account and this is not a particularly large rise. The 2p a litre increase might be absorbed by the retailer. There are significant margins in the road fuel market and it will not necessarily be passed on to the motorist, but we know what is likely to happen.

"The fuel tax is significantly lower than others and we do need to increase revenues."

Panel Member, Deputy Simon Bree said the fuel tax rise is an example of 'backdoor' taxation. 

He said: "If there is no benefit to the user, effectively this is an increase in indirect taxation."

But the Treasury Minister replied: "No, we don't feel this is particularly aggressive."