THE GOVERNMENT’S proposed 2p fuel duty hike in October has been slammed by Dundee and Angus Chamber of Commerce.

Chief executive Alan Mitchell said that, as the recent rise in price of oil has given the government a revenue windfall of over £500 million, the planned rise of 2p is unjustifiable.

He said, “The rising cost of petrol and diesel is hitting business very hard, particularly in Dundee and Angus where businesses are further away from many of their markets and private road transport is frequently the only available option for travel and the movement of goods.

“With the Treasury estimates on what it would bring in through fuel tax increases woefully out of line with reality, this extra £500 million windfall in less than two months must surely rule out the 2p rise scheduled for October.

“It is simply unjustifiable. We are calling on all the region’s MPs to stand up for the businesses in their constituencies and lobby hard for the government to abandon the planned fuel duty increase.”

His comments follow the findings of the Scottish Chambers of Commerce fuel duty model, which takes account of monthly fluctuations in petrol and diesel sales, the price of Brent crude oil and the state of North Sea oil production.

In the SCC model, exchange rate and oil price data for April was assumed constant for May.

Fair assumptions were made for oil production based on the RBS oil and gas index production figure for January (1.26 million barrels per day) and it is assumed May fuel sales will be the same as May 2007.

April’s figure is set at 1.05 million bpd to allow for the impact of the Forties pipeline closure due to the strike at the Grangemouth refinery and May production is set to 1.1 million bpd to allow for the ramp up of production after re-opening.

In order to estimate the amount of fuel duty raised from October’s proposed increase, it was assumed that fuel consumption in the UK for 2008-09 follows the same pattern as that for 2007-08.

SCC estimates the amount of additional duty that would be raised between October and the end of March 2009 would be £505 million.

The Treasury’s modelling assumption for the price of oil, $83.8 per barrel, was included to estimate by how much revenues will differ from the projections.

It is on this basis that the SCC can estimate by how much the Treasury’s receipts will have increased beyond projections to match those that will be raised later in the year.

SCC estimates the government will have raised the extra revenue that it sought from the October increase in fuel duty, estimated at £505 million, by today.

If oil prices, exchange rates and North Sea oil production remains constant until October, by this time the Treasury will have gained more than four times the revenue it will raise from further fuel duty increases—£2.2 billion.

This, the findings say, is on top of the final windfall gain to the Treasury for 2007-08 of £4.1 billion due to higher oil prices.