CEBR Fuel Duty Impact - Nov 2020

7 © Centre for Economics and Business Research correcting the externality of a club effect is to impose taxes at the margin but repay them to the other members of the club through some other form of redistribution, not to charge them and use them to finance other items of public expenditure. Nevertheless, it is clear that with the costs of Covid 19 and the associated recession pushing the UK government deficit to peacetime record levels, HM Treasury will be looking for sources of additional revenue. But at the same time UK motorists are amongst the highest taxed in the world. The latest data in Error! Reference source not found. shows that petrol taxes are slightly higher in France and Italy but the UK’s petrol taxes are very much higher than in countries like Japan or Canada. Diesel taxes in the UK are higher than in any other major economy and noticeably higher than in competitor countries like Germany, Japan, Canada, USA and China. Table 1 Comparison of petrol and diesel taxes around the world (source International Energy Agency July 2020 except China estimated directly) Petrol Diesel France 0.81 0.72 Germany 0.77 0.58 Italy 0.87 0.76 Spain 0.60 0.50 UK 0.76 0.77 Japan 0.49 0.30 Canada 0.25 0.22 USA 0.10 0.12 China 0.78 0.59 Fair Fuel UK campaigns for a fair deal for motorists and against the stigmatisation of motorists. Fair Fuel are campaigning to prevent HM Treasury from balancing its books by imposing further taxes on motorists. In this report Cebr researches the economic and distributional implications of a 2p rise in fuel duty. The research covers two points: the distributional impact and the economic impact. 2.2. Distributional impact of a rise in fuel duty Task one – what is the impact of a rise in fuel duty on companies and households? The research investigates the distributional consequences of a 2p rise in fuel duty on households by income decile and by regions. The research also looks at the consequences for van drivers and for HGV drivers