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45 comments on Fuel duty and the effect of oil prices on the UK economy
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45 comments on Fuel duty and the effect of oil prices on the UK economy
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I'd like to stress that 43p is about € 0.65 (or $ 0.85), a full half of what I pay for a liter, VAT and duty included. It is a big number and I'm not seeing any politician being able to push that forward without raising popular turmoil.
Now let me take a favorable word towards Brown. The policy up to date has been favorable to high interest rates to control inflation keeping it circa 2%/a. That's why the £ is nighing the double against the $, in practice meaning that the duty is in fact increasing - in July the duty was equivalent to $ 0.795, less 5 $ cents than today. As long as the UK keeps itself on positive economic growth, allowing for high interest rates, this policy is in fact increasing the toll on oil consumption.
The problem is that this policy is not sending the right message to public, a signal the we need to veer consumption; in fact it is signaling the opposite. This is what the politicians need to do in the future, but it requires courage. If Chancellor Brown arrives at the Prime Minister post will he have that courage?
Cost of services also seems to be way up - getting a car serviced or repaired, eating out, staying in a hotel. 2% seems a fantasy to me.
Aaaah, "lies, damn lies and statistics". The "new" way of calculating inflation is by comparing apples and oranges, known as "sample substitution", or something like that. An example: if the price of a shirt is moving too high at a name brand store the government substitutes it for a cheaper one from WalMart. That is old hat already - but it gets more insiduous: if olive oil, for example, gets too expensive vs. canola oil....statistics says you will alter your eating habits.
Et Voila... 2%.
The best case scenario was if you lived at home and scrounged off your parents, in this case you may actually experience deflation (thanks to all those cheap ipods...)
The worst was if you were a pensioner, due to the very real cost of fuel costs rising.
Me? I'm being hammered by huge increases in housing costs (relative to older folk that purchased a decade ago) especially compared to my income. Rents around here are rising faster than the rate of inflation....
Of course Brown changed which measure of inflation he uses, to the one where housing costs are not considered. This was to prevent house price increases from causing runaway inflation, and to prevent public sector workers from demanding payrises to pay for more expensive housing. This (along with a multitude of other reasons) is why I'm far from impressed with our so-called "prudent" Chancellor.
I don't believe the 2% inflation figure for one second.
Plus, I have to comment on fuel duty. Although the real cost of motoring has decreased, that's mainly due to cheap credit and cheaper cars.
The cost of FUEL has increased above the rate of inflation. I don't see how it is fair that the Chancellor can increase his tax take on fuel pushing the total cost up beyond inflation.
Plus no one ever mentions that there is a component of tax on fuel that increases with inflation. VAT.
In late 2003, I could buy petrol for 77p/litre. VAT accounted for 13.475p
Now in 2006 petrol is 85p/litre. VAT accounts for 14.875p
That's a 10% rise on VAT receipts. In a period where inflation has supposedly been 6% So the Chancellor has already had his inflation busting increase in VAT receipts from fuel.
The price of fuel, as mentioned, has already gone up beyond inflation. The excuse that the treasury receives less total cash (adjusted for inflation) because there has not been inflation increases on (fixed) fuel duty just will not wash with the public. Especially considering the vast increases of Stamp Duty receipts, North Sea revenues and VAT recipes on home fuel (5% of a 30% rise in consumer costs).
Nope, Gordon has massively increased tax take, and we've got little to nothing to show for it. Especially as most of our new schools/hospitals are now PFI, which is the government equivalent of buying it on a credit card and only paying the interest charges.
Not impressed
Andy
Can't believe I did that.
Ironically petrol prices are rising above inflation.
At 77p/litre petrol is 18.4p for the actual petrol, the rest is tax.
At 85p/litre petrol is 25.2p/litre
That works out at 11% per year inflation over the last 3 years on the cost of the actual petrol.
So the huge duty actually acts as an insulator to the product costs.
Oh, the irony....
Andy
My personal feeling is that the affluence has gone way up with the arrival of the €. In the 1980s people started to afford a house, in the 1990s it was the private car and multi-car family. Lately it has been vacations in the Caribbean or Brasil and for some lucky ones Seychelles or maybe Mauritius.
We live incomparably better than 20 years ago. So those inflation numbers are not much of an indication of what's going on. Since we have high tolls on gas we haven't felt that much the gas prices, although last Summer they were almost 50% above early 2004.
I do feel the hike on manual labour services like you say, mechanics (my bike mechanic earns more than I), restaurants, house keeping, etc, mainly due to lack of supply of such workers. But these hikes have been offset by the growing affluence brought be the €. In 10 years the minimum monthly wage in $ almost doubled (from circa 270 $ to above 530 $).
The real big concern here is that people went like crazy into debt, which went over 100% of house income 3 or 4 years ago. Today even families with annual income above 35000 € are flocking into protection in face of Trichet's rate hikes. So basically debt crunched families are feeling great pain in a time like no other here. My parents could only dream of the life middle class families now have.
The euro has not "brought" affluence, but it has allowed interest rates to come down, all other things being equal, of course. And even that is relative: your viewpoint if from the perspective of Portugal, a country which (like Greece) would never have had such low rates, were it not for the euro. That does not apply to more fiscally conservative countries like Germany, Netherlands, etc. In fact for them the euro is a very mixed blessing.
In any case, the ability to borrow more money is not affluence, but the ephemeral spending of future earnings. After a certain point, we are in reality spending our children's incomes as well as our own - and that is why we "feel" richer. We consume more and we condemn our children to a pauper's life.
Just think of it like Peak Oil: burn it now like it will always be there and our children will go back to a life of gathering wood.
Regards.
I guess you're right. Sometimes these things aren't easy to percept.
There's one thing I didn't mention, during these last 20 years Housing went through the roof. My house cost something like 50 years of minimum wage, and the minimum wage isn't enough the pay the mortgage of a decent place in the Lisbon. Right now some banks are making way for 80 years mortgages that after the death of the contractors automatically fall on their heirs.
Still my point was that life is much easier and with a lot more comfort than what it was 20 or 25 years ago. And to someone with no major debt obligations is incomparable to the 1980s.
This has to do with the turbulent fall of the fascist regime in the 1970s that drown the country in problems, eventually exploded in the 1982 recession in the wake of the Iran-Iraq war. The EEC in 1986, the free market in 1992 and the € in 1999, all brought (in my view) the country a bit closer to European standards.
Also when you say debt over 100% of house income - does that mean 1* combined sallary. In the UK we're now on 5* sallary for mortgage debt alone - with some rediculous 30 to 40 year repayment plan.
Here we have monthly wages and mortgages. During the year folks pay 12 times the mortgage and get 14 wages - twice in July (so they can go to Brasil) and twice in November (so they can go to the Pyrenees).
Meaning that debt is over 100% is the same as saying that folks need more than 12 wages to cover yearly debt repayments. So instead of going to Brasil they will settle for the Algarve, and instead of the Pyrenees if they stay at La Covatilha it'll be great.
for what it's worth, in the UK, "wages" tends to imply "paid weekly", while "salary" tends to imply "paid monthly" (although the two do get used interchangeably)
What Euan meant was that a typical mortgage is currently 5* annual salary. So, if you earn £20,000 per year, then you could get a mortgage of £100,000. Which is still not enough to buy even a one-bedroom flat in some parts. (For reference, many public sector workers - nurses, teachers, other civil servants - earn significantly less than that, although more senior ones do earn more)
"Ofcourse it depends where you shop - ASDA / Wallmart you can pick up "trash" dirt cheap."
True. Or you can shop at the upmarket stores, and pick up "trash" way high! :-)
RC known to you as ThatsItImout
The more you beat them the better they be
Time for some re-education Euan, pretty little M&S morsels do not make sufficient food for a hard working man.
IMO the government needs to introduce "draconian" legislation aimed at reducing consumption of fossil fuels and consumptive waste. How they achieve this and emerge with an intact economy is another matter. Consume less and be happy does not equate to economic growth.
I'm with you on this one. Whatever happens, the vast majority of people always have and always will operate and make choices to their own short term (predominantly financial) benefit. It's how the world works. Perhaps this situation erodes a little when a nation is at war?
It's up to Government to construct a framework whereby many individuals, each acting selfishly can collectively achieve something great. Depending on your understanding of "great", capitalism is such a system.
The challenge for the future is to rearrange the rules of the game such that individualistic and selfish behaviour can deliver a sustainable future. Any ideas?
I have pondered this question. The thing is, the rules of the game have not been imposed on us by some outside entity. We chose them. We chose them because they meet our desire for personal gain. If someone tries to impose different rules, we will seek ways to revert them back to preferred rules.
So the question becomes how do we change our desire for personal gain? This is derived from our genes, we are programmed by evolution to acquire wealth, in order to promote our chances of passing on our genes.
Humans however also have an exceptional capability to cooperate. It is really this feature and not just desire for personal gain that has enabled us to get were we are today. We normally only cooperate when there is a win/win outcome, we don't cooperate if there is a lose/win outcome. That is, cooperation is applied where it satisfies both parties desire for personal gain. Without advanced cooperation, we would still be at the level of familial hunter/gatherers.
Therefore the problem is that if we conciously choose a different, low-growth system, we risk being outflanked by people who stick to high-growth system, unless we can get the whole world to "play fair". This is the problem with Kyoto. No-one wants to concede advantage.
So in order to rearrange the rules to create a sustainable future, we need everyone to agree to a concious decision to override our inbuilt programming, and accept some lose/win. Getting such a level of understanding and agreement is quite a tall order. Perhaps when the situation gets so bad that everyone is losing, then we will cooperate to minimise a lose/lose situation. Cooperation got us into this mess, perhaps it will get us out of it.
http://www.simpol.org.uk/simpoluk.php
to pressurise politicians worldwide into cooperation.
Push comes to shove when its no longer tax, its subsidy.
If you are looking for modification of the habits of civilisation, look elsewhere. Discover why normal people might want to change, because tax is a blunt and ineffectual weapon.
These aren't Green Taxes, they're just more Stealth Tax.