Jenrick: halve vat on fuel

At a petrol station in Kent, Robert Jenrick will this morning call on the Chancellor to halve VAT on road fuel for 3 months to ease pressure on motorists.

Reform's Shadow Chancellor will offer local motorists 5p off their fuel at a petrol station in Dover as part of Reform's campaign to reverse Rachel Reeves's fuel duty rise. 

The tax cut would reduce pump prices by around 12p per litre for petrol and 14p per litre for diesel at current prices, at a static Exchequer cost of about £1.5 billion. The measure could be funded within current spending envelopes using the estimated £2.7bn windfall from higher oil prices that the Chancellor has received. 

Similar moves have been implemented by governments in Spain, Portugal and Ireland within the last few days, with more countries reported to be considering the move as petrol prices soar at the pump. Spain's socialist Prime Minister, Pedro Sánchez, announced a reduction in VAT on fuel from 21% to 10% as part of a cost-of-living package to tackle the cost of living.

Reform UK Shadow Chancellor Robert Jenrick MP said:

“The Chancellor is raking it in while motorists suffer. The rising costs of fuel are really hitting alarm-clock Britain right now. She's making tens of millions of pounds a week in extra tax revenue as a direct result of the war; the least she could do is lessen the blow. 

"Governments all across Europe are cutting VAT as a much-needed measure. Reeves should stop being so gormless and initiate an emergency VAT cut without delay.”

Notes to Editors:

• Earlier this month, Nigel Farage and Robert Jenrick announced plans to reverse the government's planned 5p rise in fuel duty and cut costs for British drivers by scrapping green spending, including the Boiler Upgrade Scheme, the Carbon Capture Usage and Storage spending, and the Electric Car Grant.
• In a separate announcement, Reform UK also pledged to scrap VAT and green levies on household energy prices if Reform was in government, in a move which could save UK households £200 a year.

Savings & Costings Annex

This annex estimates the static cost of a temporary 3-month cut in VAT on road fuel from 20% to 10%. Road fuel is currently subject to the standard 20% VAT rate, and HMRC states that for fuel, VAT is due on the total value, including any excise duty. The current main fuel-duty rate for petrol and diesel is 52.95 pence per litre. 

The calculation uses the latest official weekly UK pump prices for the week commencing 23 March 2026:

Petrol: 144.16 pence per litre

Diesel: 166.88 pence per litre

These prices are:

Current price = (Wholesale cost + fuel duty) * 1.2

If VAT on fuel were halved, the new price would be:

New price = (Wholesale cost + fuel duty) * 1.1

Cost of Fuel Reduction

So, cutting VAT on road fuel from 20% to 10% lowers the pump price by one-twelfth. 

Applying that formula to the latest official prices gives:

Petrol saving: 144.16/12 = 12.01 pence per litre

Diesel saving: 166.88/12 = 13.91 pence per litre

So, at current prices, halving VAT on road fuel would reduce pump prices by around 12.0p/litre for petrol and 13.9p/litre for diesel.

Costing

The OBR's latest tax forecast says fuel duties will raise £24 billion in 2025-26. Since the main fuel-duty rate is 52.95p per litre, this implies annual duty-paying fuel sales of:

24bn / 0.5295 =45.33bn litres per year.

This implies 3-month fuel sales are: 11.33bn litres. 

Because the OBR-based litres figure is an all-fuels total, the simplest central estimate uses a current average per-litre saving across petrol and diesel. 

Using current official prices, the average saving is roughly 13 pence per litre. 

Multiplying by the implied 11.33 billion litres over 3 months gives a cost of roughly £1.5 billion.

How Much Extra Reeves Is Set to Rake In

Using the official DESNZ weekly fuel-price series, in the week commencing 23rd February 2026:

Petrol: 131.71p/litre

Diesel: 141.46p/litre

Now:

Petrol: 144.16p/litre

Diesel: 166.88p/litre

So the recent increase is:

Petrol: +12.45p/litre

Diesel: +25.42p/litre.

Because VAT is charged at 20% on the VAT-exclusive price, the VAT share of a rise in the VAT-inclusive pump price is one-sixth.

So, relative to late February, the Treasury is now collecting about:

2.08p more VAT per litre of petrol

4.24p more VAT per litre of diesel

A recent public estimate citing HMRC fuel-use data says the UK uses around:

1.55 billion litres of petrol per month

2.4 billion litres of diesel per month.

If prices are sustained over the next year, this will lead to an extra:

(2.08 * 1.55 * 12) + (4.24 * 2.4 * 12) = £1.61bn in tax revenue.