green fuel tax, USA News (London): John Healey is considering expanding taxation on imported fuel in next week’s Budget, triggering fears that record-high petrol prices will continue to soar, according to reports. The policy means introducing a new tax on overseas imports to match those currently paid by UK manufacturers. Supporters argue the levy will level the playing field, preventing British companies from being undercut by foreign competitors and tightening the UK’s energy security. Critics contend that consumers, already hit by record high prices at the pumps due to the US-Iran conflict, will be stung by the proposed changes.
The Chancellor is allegedly weighing a carbon charge on refined fuel products like petrol and diesel imports, The Daily Telegraph reports. Under a new carbon border adjustment mechanism (CBAM), imported fuel would incur the same costs as domestically refined products. Energy Secretary Miatta Fahnbulleh is reported to support expanding the CBAM, which takes effect on January 1, 2027. The changes will see imported raw materials such as aluminum and steel taxed with an additional carbon charge, which would extend to petrol and diesel under the proposals.
The RAC Foundation estimates the government has collected approximately £1.27bn in extra VAT on petrol and diesel since prices soared following the start of the conflict on February 28. In Wednesday’s Budget, Healey will look for ways to curb the Government’s nearly £3tn debt amid soaring interest rates. Fuels Industry UK Chief Executive Elizabeth de Jong stated the proposed tax would bring investment to the UK and prevent carbon and investment leakage, noting the importance of domestic manufacturing for energy security.
Consumers currently pay nearly £1.75 a litre for petrol, representing a 31 per cent increase since the Middle East conflict began, according to the RAC. Diesel prices have risen 40 per cent to a record £2 a litre. TaxPayers’ Alliance Chief Executive John O’Connell criticized the carbon charges as a shameless tax raid disguised as environmental policy that will inflate pump prices and supply chain costs.
The Government previously extended a 5p temporary cut on fuel duty through the end of the year, though future extensions remain unclear. The levy is scheduled to rise by 3 pence to 55.95 pence on January 1 and by another 2 pence on March 1, adding 6 pence to a litre of fuel. From April, fuel duty will rise in line with the Retail Prices Index of inflation, currently at 3.9 per cent.
