A Bonanza!

The Financial Times yesterday answered a question we have all been thinking about. The Chancellor would have difficulty in foregoing his extra 2p on a litre of petrol, because the Government's finances are in such a mess, but won't he get more as the pre-tax oil price rises, and tax is at least in part a percentage?

The F.T. published calculations by Maurice Fitzpatrick, senior tax manager at the Grant Thornton accounting firm. Tax revenues from North Sea Oil would rise from about £10 billion, set when the price of oil was $84 a barrel, to about £16 billion with the current price of $128 a barrel. In fact even since the budget in March the Treasury has already gained extra revenue of £820 million.

So the £6 billion extra revenue would easily cover the cost of u-turns on both delaying the implementation of the 2p on duty and also foregoing the new bands on vehicle licence to punish those who bought larger cars in the past. Specifically delaying the 2p on duty for six months would cost £550 million, scrapping the increase in vehicle licence would cost £465 million next year and £753 million the following year. So there would be scope to reduce still other taxes as well!

This is to ignore the point that the taxes are "green", i.e. encouraging less use of so-called global warming fuels.

Will the Government admit their "bonanza", if oil prices stay high? I doubt it. This is something of another stealth tax, except that people are noticing it.