The Independent on Sunday: Brown plans fuel tax review as olive branch to petrol lobby: “The Treasury has agreed to set up a working group which, together with government officials, will include representatives of the UK Petroleum Industry Association, whose members include BP, Shell and other leading oil companies.: Sunday 18 Sept 2005

By Tim Webb

Published: 18 September 2005

Gordon Brown is to carry out a wide-ranging review into how the Government taxes petrol following last week's fuel protests, The Independent on Sunday has learnt.

The Treasury has agreed to set up a working group which, together with government officials, will include representatives of the UK Petroleum Industry Association, whose members include BP, Shell and other leading oil companies.

The group - which is being co-ordinated by John Healey MP, Financial Secretary to the Treasury and close to the Chancellor - is expected to meet for the first time next month before the pre-Budget report in November. The Petrol Retailers Association (PRA), which represents independent retailers, will also be involved.

In July, Mr Brown agreed to postpone the rise planned for this month in fuel duty, which is currently 47.1p on a litre of unleaded petrol - one of the highest rates in Europe. During last week's protests - which attracted far less support than the politically damaging blockades five years ago - the Chancellor was keen to demonstrate that militant action would not influence government policy. He refused to rule out increases in fuel duty next year.

But behind the scenes, Mr Brown is prepared to review the whole tax regime to address growing public concern over rising petrol prices. These last week averaged 96p for a litre of unleaded petrol, an increase of 4p in a fortnight.

Ray Holloway, director of the PRA, said that the working group provided an opportunity to "start with a blank sheet of paper" in reviewing fuel duty. "We need to decide first of all what is a fair level of taxation for fuel duty. We have been tied to the current system for 30 years," he added.

The RAC Foundation, the lobby group, has already written to Mr Healey calling for duty rates to float in line with oil prices in order to smooth out the impact of price hikes such as those witnessed this month.

Petrol prices, which began to fall at the end of last week, could start to rise again next month as colder weather sets in. Mr Holloway has predicted that diesel could cost £1 a litre by November, and that next spring, prices for unleaded petrol could also go through the £1 a litre mark and stay there. He blamed the shortage of refineries in the US, a situation made worse by the damage caused by Hurricane Katrina, which has cut supplies of petrol and driven up prices in Europe.

"It will take years to put the bottlenecks in refining right," Mr Holloway said. "In the meantime, demand for oil will continue to rise. We are in for a high price game for a while."

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