13 ÓCentre for Economics and Business Research 4. Distributional impact of a 23% rise in fuel duty 4.1. Introduction This section analyses the distributional impact of a 23% rise in fuel duty looking first at the impact of different income groups, then at the impact on van users and finally at the impact on HGV users. 4.2. The scale of the increase There is Family Spending Data for 2020/21 but this data, especially for transport, is badly affected by the lockdowns resulting from Covid. The analysis is therefore based on family spending data for 2019/2012, the most recent data available that is (largely) not distorted by lockdown effects, except where otherwise stated. The average price of petrol and diesel per litre during the 2019/20 period were respectively 125.9p and 131.5p13. As pointed out in the previous section we have assumed that 82% of the increase in duty (including VAT) is passed on in the retail price after a lag of 6 weeks. This implies an increase in the retail price of both petrol and diesel of 12p per litre. 4.3. Impact by income level The impact is not spread evenly between households. This is because households at different income levels spend different proportions of their incomes on fuel. Table 2 shows that the share of gross expenditure spent on fuel rises with income decile until the middle-income groups and then falls back. But this is misleading – many in the lower income groups do not buy fuel. To understand the impact of fuel price rises on different income groups it is worth looking specifically at those in each group who have access to cars. There is official data for this, though the most recent data is for 201814. Using this data it is possible to estimate the proportion of expenditure spent on fuel for those who have access to a vehicle and who therefore have to buy fuel, Table 2 also shows that the proportion of their gross income spent on fuel peaks at 7.2% for the lowest income decile and falls to 3.3% for 12 https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/expenditure/bulletins/familyspendingintheuk/ april2019tomarch2020 Downloaded 29 November 2022 13https://www.gov.uk/government/statistics/weekly-road-fuel-prices 13 October2020, Downloaded 29 November 2022 14 https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/expenditure/datasets/percentageofhouseholds withcarsbyincomegrouptenureandhouseholdcompositionuktablea47
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