The coronavirus lockdown has seen a massive reduction in income from fuel duty, which was 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 (£1,510m) compared to £2.9bn (£2,939m) in 2019.
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.
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 (£1,621m – £799m in April and £822m in May) 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. This equates to just £317m a month which is £493m less than the average duty petrol has brought in each month since 1990.
Collectively, the duty take on petrol and diesel fell to £2.1bn (£2,144m – £1,198m in April and £946m in May) compared to £4.5bn in 2019 (£4,560m – £2,327m in April and £2,233m in May). 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 (£2,422m).
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.”