Business leaders have urged the Government to review the way it taxes fuel amid growing concern about the effect rising petrol prices are having on small firms.

The Forum of Private Business (FPB) yesterday launched a petition calling on Chancellor Gordon Brown to cut fuel duty to ease the pressure on its members.

Spokesman Rex Garratt said: "Business is solely dependent on petrol and diesel to deliver goods or services. It is not a luxury and should not be taxed as if it was a luxury."

The FPB wants Mr Brown to link fuel duty to oil prices to ensure greater stability at the pumps.

Mr Garratt said: "When oil commodity prices are high, as they are now, the Treasury could lower duty on fuel by an equivalent amount and keep pump prices at a stable level.

"The Government would not be losing revenue because it will be clawing in extra VAT, plus extra tax on Britain's own oil production, as well as extra tax raised on the massive profits of Shell and BP."

Consumer price index figures showed that surging fuel costs pushed headline inflation to 2.4 per cent in August, the highest level since 1997. Meanwhile, economic growth in Britain is expected to slump to 1.9 per cent as a result of rising oil costs, according to the International Monetary Fund.

Strong growth in global demand for fuel has driven the cost of crude oil from $35 a barrel in July 2004 to more than $60 a barrel. The UK Government also levies 47.1p a litre in tax in addition to VAT.

Britain's biggest business organisation, the Federation of Small Businesses, said firms now faced a stark choice - absorb the fuel cost increases themselves or pass them on to their customers.

FSB transport chairman Steve Collie said: "We accept that with increasing global demand and unreliable supply, particularly following Hurricane Katrina, prices are bound to increase.

"But ministers must not lose sight of the fact that at cost price UK fuel is the cheapest in Europe. It is only after fuel duty and VAT are added that it becomes the second most expensive.

"For some small road haulage businesses, fuel costs have mushroomed from about a quarter of their total costs to more than half.

"Rising fuel prices do not only affect the road haulage industry. Many businesses face increased distribution costs and manufacturers are forced to pass on the increased costs of raw materials to their customers."

Mark Duggan, managing director of Crawley haulage firm Eezehaul, said he was frustrated by Government inaction on fuel duty and called for greater parity with Europe.

He said: "The Government recently scrapped a road user charging scheme which would have looked at duty rates for essential users. There is currently nothing on the table from the Government to address this issue."

Tuesday, September 27, 2005