Fuel Price Escalator

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The Fuel Price Escalator (FPE) was the practice of automatically increasing hydrocarbon oil duty (better known as 'fuel tax') in the United Kingdom ahead of inflation. The escalator was introduced as a measure to stem the increase in pollution from road transport and cut the need for new road building which was then a politically sensitive topic. The escalator also resulted in significant increases in revenue for The Treasury.

The fuel price escalator was introduced by the Conservative government in 1993 and set at an annual increase of 3% ahead of inflation, later rising to 5%. After gaining power in 1997, the rate of increase was raised by the Labour government to 6% per year. The last rise due to the escalator took place following the budget on March 9, 1999 [1].

The end to the escalator was announced on November 9, 2000, following the UK fuel protests, of which it was a contributory factor. When the escalator ended, fuel in the UK was the most expensive in Europe, with fuel tax representing over 75% of the retail price of fuel. In 1993 UK fuel had been amongst the cheapest in Europe.

Cambridge Econometrics estimated that by 2010 abandoning the escalator will have resulted in annual fuel use being 11% higher and carbon emissions 4 million tonnes greater than would otherwise have been the case ^[1].