Bill Carmichael: Filling up the tax coffers

According to the AA, the average cost of unleaded will hit record levels of 1.20 a litre – that's about 5.45 a gallon – in a matter of days. And that's before the Treasury slaps on another 3p a litre in petrol duty on April 1.

MPs are fuming and pointing the finger of blame firmly at the oil companies. Lindsay Hoyle, a senior Labour member of the Commons business select committee, thundered: "Motorists are being mugged at the forecourt by petrol companies."

This is utter nonsense. The reason petrol costs are so scandalously high can be summed up in one word – tax.

If Lindsay Hoyle and his fellow MPs want to discover the real villains of this story, they should take a long look in the mirror.

Far from "mugging motorists", oil companies have been busily closing refineries and service stations because they are not sufficiently profitable. There were 16 refineries and 20,000 service stations in the UK in 1974 – today, there are eight refineries and 9,000 service stations. BP's profits fell by 45 per cent last year.

How can this rise be explained? Shortage of supply – because refineries have been shut – and the weakness of the pound (wholesale petrol is traded in US dollars) have a role. As a result, wholesale prices have risen by 17 per cent since January.

But all this makes only a marginal difference. The actual cost of petrol is less than half what you pay at the pumps – the rest is tax that goes directly to the Treasury.

You pay a stonking 56.16 pence per litre in petrol taxes, soon to rise to 59p. You then pay a further 17.5 per cent VAT on the fuel and duty – effectively a tax on a tax.

As a result, UK fuel prices are among the highest in the developed world. The Americans, for example, have to buy their petrol at the same wholesale markets we do, yet US motorists typically pay about half the UK price for their "gas".

This threatens our economic recovery. The Freight Transport Association said a third of hauliers are considering laying off workers because of high fuel prices.

It also hits the poor and those on fixed incomes. The Association of British Drivers calculated that someone on the national minimum wage could pay more than 10 per cent of their income in fuel taxes.

So where does all this money raised in taxes at the petrol pumps – estimated at about 45bn a year – go?

This is where it gets interesting. In 1999, Gordon Brown made this promise: "If there are any real term rises in road fuel duties, the revenues will go straight to a ring-fenced fund for the modernisation of roads and public transport."

So how much has been paid into this special fund? Not a single penny. How much has been used to improve roads and public transport? Very little. Only about 7bn a year is spent on roads; the rest that is raised from fuel and road taxes is poured down the insatiable maw of the state to recruit ever more non-jobs in the public sector in the hope they will vote Labour.

If Labour MPs really want to help, they could lobby the Government to shelve next month's 3p a litre rise.

And they could show solidarity with the suffering public by cutting their own absurdly lavish mileage allowances.

Brothers Unite

THE Tories – in the guise of the normally mild-mannered Michael Gove – seem to have at last got a little fire in their belly.

Gove has been giving the Government some stick over Gordon Brown's close links to the Unite union and its political director – the poisonous political bruiser Charlie Whelan. The Tories are on firm ground.

How can the Government act as an honest broker between the unions and BA when Unite has given Labour 11m since Brown became PM? If the threatened air crew strikes go ahead and families find their travel plans ruined, they can reflect on one fact – the Government that pretends to represent them has, in fact, been bought and paid for by their union masters.