Government watches fuel duty revenue plummet by £2.4BILLION in just a two month period

The coronavirus lockdown has left a massive hole in the Treasury’s coffers from lost fuel duty revenue, with income down by £2.4bn in April and May compared to the same time last year, according to the RAC’s analysis of new HM Revenue and Customs data.

Revenue from duty on diesel – charged at 57.95p per litre like petrol – was worst affected. Despite being the fuel of business duty on diesel fell by 49% over the two strictest lockdown months to £1.5bn compared to £2.9bn in 2019.

In May diesel fuel duty only generated £695m for the Treasury in stark contrast to 2019 when £1,411m was collected. April raised £815m as opposed to £1.5bn (£1,528m) a year earlier.

Over the same two months in 2019, duty on petrol brought in £1.6bn or an average of £811m a month. This year with the vast majority of Britain’s 41m drivers confined to their homes, revenue from 18.8m licensed petrol cars fell to £251m in May – the lowest figure since 1990 – and £383m in April, making for a total of £634m.

Collectively, the duty take on petrol and diesel fell to £2.1bn compared to £4.5bn in 2019. HMRC figures dating back to 1990 show the lost revenue from April and May 2020 was similar to the duty receipts of £2.4bn from just one month in May 2015.

In monthly terms, the £946m fuel duty raised in May was the 33rd lowest figure – only months from the early 1990s were lower when there were only around 24m vehicles on Britain’s roads compared to the 31.8m today.

Data from RAC Insurance black box customers shows that throughout April and May 2020, only 50% of these vehicles were on the road on average.

RAC Head of Roads Policy Nicholas Lyes said: “The financial impact of the coronavirus on the Government has clearly been immense. The lost revenue on fuel duty is a further blow to the public finances and while motor traffic volumes have recovered during the summer, they are still between 10-15% below pre-lockdown levels.

“The temptation for the Chancellor might be to recoup some of the losses by increasing fuel duty, but with the country staring down the barrel of one of the sharpest recessions on record such a move would risk choking any economic recovery at a time when drivers and businesses are most struggling.

“This perhaps gives the Government a glimpse into the future of when fuel duty revenues start to decline more sharply with the rise of electric and other alternatively fuelled vehicles. Treasury officials might want to start thinking about how the Government approaches such a scenario considering fuel duty normally generates around £27bn a year.”