Should There Be Petrol Credits?
UK residents of State Pension age receive a Winter Fuel Payment each year to help with heating bills. The government introduced this payment to reduce the high number of deaths occurring amongst pensioners in the December to March period due to fuel poverty. But what about fuel poverty of a different sort?
In the UK, 70-80% of what we pay on petrol and diesel is tax, meaning the poorest families are spending nearly 4% of their disposable income on fuel each year. The richest families only spend 2% or less of their disposable income on fuel (see Chart 1 below). This means fuel tax hurts the poorest people nearly twice as much as it hurts the richest, leading us to ask should their be petrol credits for poor people?
Households are ranked by their equivalised disposable incomes, using the modified OECD scale. Source: Office for National Statistics.
How It Might Work
It could be paid for by increasing the standard price of fuel. A discount off this standard price would then be means tested, and paid when the income of the applicant and partner is below a certain level. Because a similar system is already in place for pension credits it would make it easier to implement.
- It would make fuel taxation as fair as income taxation.
- It would help poorer people look further afield for work.
- It would help more people out of the poverty line.
- There are already too many cars on the road, and in an era where we should be encouraging more environmentally friendly transport such as bikes and buses, this would do the opposite.
- It would make a complex tax system even more complex, increasing overheads at a time when reducing them is of huge importance to help reduce the budget deficit.
- It reduces the incentive for people to work harder in order to earn more, as they would lose benefits if they did so.
What Do You Think?
Would you be for or against this being introduced?