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Every Government Is Cutting Fuel Taxes. Reeves Can't Afford To
Britain's non-tax component, the actual cost of the fuel itself, is roughly 72 pence a litre. Its tax take is 78 pence, made up of 52.95 pence in fuel duty plus VAT at 20 percent on the full pump price, including the duty. That is a tax on a tax. At £1.50 a litre, Britain is already paying more at the pump than the United States, Japan, Canada, Australia, Poland and Spain. The British state is extracting more from every litre of petrol than almost any comparable country on earth. And now, when every other government is cutting that take to protect its citizens, Starmer's government is silent.
Crude oil prices have surged sixty percent since the US and Israel began attacking Iran. The closure of the Strait of Hormuz has removed a fifth of global oil and gas supply from the market. Governments across Asia and Europe are responding. Australia has halved its fuel levy. France has subsidised trucking companies and cut farmers' diesel excise to zero. Spain has cut VAT on fuel from twenty-one percent to ten percent. Norway, Ireland, Poland and Italy have all announced relief measures. India has cut fuel taxes to near zero. Japan is releasing oil from its national stockpile. Even Vietnam is cutting taxes and urging citizens to carpool.
Britain has announced nothing. Keir Starmer told the public there is no need to do anything other than what is normal.
The reason is arithmetic. Rachel Reeves has already committed to ending the long-standing five pence cut in fuel duty this autumn, a move that will bring in just over two billion pounds. That two billion is not a discretionary line in the budget. It is load-bearing. Reeves has made spending commitments that depend on it. To reverse course now would require her to stand at the despatch box and admit that the fiscal strategy is broken. Which it is. But which she cannot say.
So the government does nothing and hopes the crisis passes before the political cost of inaction exceeds the political cost of honesty.
The figures make the position untenable. France's debt-to-GDP ratio stands at 113 percent, nearly twenty points above Britain's 94 percent. It has found the money. Spain's ratio is 101 percent. It has found five billion euros. Italy, Norway, Ireland and Poland have all found the money. Britain, with more fiscal headroom on paper than France, has found nothing. The argument that this government cannot act because the public finances are too tight is not an economic argument. It is a confession that Labour has already spent money it has not yet collected, on commitments it made before the world changed.
This matters beyond the price at the pump. Britain went into this crisis with 1.5 days of gas in reserve. It is the only G7 country that cannot produce virgin steel. It pays the highest wholesale energy prices in Europe. It has no buffer, no storage, no domestic production to fall back on. Every price shock that hits the global market hits Britain harder than it hits comparable nations, because successive governments removed every layer of insulation between the British public and the market. And now, when the market delivers its sharpest shock in years, the government that promised to protect working people discovers it has nothing left to protect them with.
Starmer told motorists to carry on as normal. For this government, normal means a crisis it cannot afford to address and a fiscal position it cannot afford to admit. The public will pay the price for both.
"Reeves has made spending commitments that depend on it. To reverse course now would require her to stand at the despatch box and admit that the fiscal strategy is broken."


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