Rachel Reeves has extended the fuel duty freeze at the Budget, allaying fears that motorists would have to pay higher taxes at the pump.
Ms Reeves said she would keep the freeze on fuel duty, which has been in place since 2011, as well as maintaining for another year the 5p cut brought in by the Conservatives in 2022.
It came despite fears she would seek to end the freeze to raise funds in the Budget, after she warned of a £22 billion ‘black hole’ in the public finances.
But the Chancellor said increasing fuel duty “would be the wrong choice for working people”. Freezing fuel duty and maintaining the 5p cut will cost £5 billion per year.
Ms Reeves said: “While I have sought to protect working people with measures to reduce the cost of living have had to take some very difficult decisions on tax. I want to first set out my approach to fuel duty.
“Baked into the numbers that I inherited from the previous government is an assumption that fuel duty will rise by RPI next year and that the temporary 5p cut will be reversed. To retain the 5p cut and to freeze fuel duty again would cost over £3bn next year.
She added: “At a time when the fiscal position is so difficult, I have to be frank with the House that this is a substantial commitment to make. I have concluded that in these difficult circumstances while the cost of living remains high and with a backdrop of global uncertainty increasing fuel duty next year would be the wrong choice for working people.
“It would mean fuel duty rising by 7p per litre.
“So, I have today decided to freeze fuel duty next year and I will maintain the existing 5p cut for another year, too. There will be no higher taxes at the petrol pumps next year.”
Drivers and fuel groups welcomed the announcement.
Howard Cox of the FairFuelUK campaign, said he was “delighted” at the news.
Rachel Reeves “seems to have finally recognised that keeping Fuel Duty frozen is at the core of a laudable journey to economic growth,” he said after the announcement.
William Porter, policy and public affairs manager at road safety charity RoadSmart Policy, said: “We welcome the Chancellor’s decision to maintain the fuel duty cut, at least for now.
“Motorists have endured a torrid few years of high prices at the pumps and this decision will give them a much-needed boost.”
Matthew Briggs of Fuel Duty Card: Edenred, said: “Whilst, positively for consumers, fuel prices are on a downward trajectory, there is still work to be done to support those struggling to cover costs. “
Whilst wholesale fuel prices are out of the Government’s hands, we’re hopeful that prices continue to fall for the rest of the year and beyond, as this would benefit both customers and businesses.”
Others criticised the move, saying that it was a negative step for the UK’s green credentials.
Paul Johnson of the Institute for Fiscal Studies said: “For goodness sake. Despite big tax rises overall chancellor has done it again. Fuel duty frozen and ‘temporary’ 5p cut kept.
“This government is supposed to care about climate change.”
