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Tory plan hit by PM
The government has dismissed Tory proposals to cut fuel tax when oil prices rise as a “gimmick”.
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Prime minister Gordon Brown claimed rising fuel costs affect the economy and decrease the tax take in other areas.
The Treasury argued the Conservative’s scheme could leave a £3bn gap in public finances, forcing the government to make up for the loss by increasing taxes elsewhere.
The Conservative party said a Tory government would introduce a “Fair Fuel Stabiliser”, which would use the additional tax revenue generated by oil price rises to absorb 50 per cent of pump price hikes.
As the Tories claimed the government benefits from an additional £100m a year for every $1(50 pence) per barrel hike in oil prices, they say this system would see the government “sharing the pain” of consumers when prices went up, as well as the benefit when they dropped.
The Tories also said the plan would keep prices lower, reducing inflation from 3.3 per cent to 3 per cent.
Shadow chancellor George Osborne said that if the system had been introduced in March, fuel prices would currently be 5 pence cheaper than they are right now.