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David Cameron looking to link fuel tax with price of oil

The Prime Minister has revived the possibility of pegging tax on fuel to oil prices as part of a Government effort to help motorists.

David Cameron said the recent rise in oil prices, compounded by this week's 2.5% increase in VAT, was very “painful and difficult” for drivers and the Treasury was now looking at a fuel stabiliser.

If it were introduced, the proportion of tax paid by motorists would fall when prices went up and rise when fuel prices went down.

Speaking at Caterpillar's plant in Leicester yesterday, Mr Cameron said the recent increase in fuel duty was inevitable as it was part of Labour's tax plans. He said: “I think we also need to ask ourselves this question, and I am working with the Treasury on this.

“Is there a way in which when the oil price goes up, if the Treasury is getting more revenue out of that oil, can we find a way of sharing that risk with the consumer? Ie if the price goes up, the tax comes down, and if the price goes down, the tax goes up.”

“We are looking at it. It's not simple, it's not an easy thing to put in place but I would like to try and find some way of, as I say, sharing the risk of higher fuel prices with the consumer.”

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