Rachel Reeves has abandoned plans to increase fuel duty later this year as rising fuel prices continue to add pressure to household budgets.
The Chancellor had been expected to raise fuel duty by 5p a litre in September, ending a freeze that has been in place for 15 years. However, Sir Keir Starmer confirmed on Wednesday that the freeze will now remain until the end of 2026.
The decision comes as petrol and diesel prices continue to climb following the conflict involving Iran, increasing concerns over the wider cost of living.
Announcing the move during Prime Minister’s Questions, the Prime Minister said the Government would also introduce a 12 month road tax holiday for hauliers to help keep transport and food prices down.
Sir Keir told MPs:
“We’re giving our hauliers a 12 month road tax holiday, helping to keep prices down, and we’re backing drivers by extending the freeze in fuel duty for the rest of the year.”
The Government said the measures were intended to support families and businesses facing higher costs.
The Conservatives welcomed the announcement, claiming Labour had changed course after months of pressure over the planned increase.
Sir Mel Stride, the shadow chancellor, said the proposed rise would have “hammered hard working families already stretched to breaking point”.
He added:
“For months I’ve been calling for Reeves to axe her fuel tax hike. After Conservative pressure, Reeves has finally been forced into a U-turn.”
Fuel prices have risen sharply in recent months. Industry figures show the average price of unleaded petrol reached 158.52p a litre on Tuesday, the highest level since late 2022.
Petrol prices are now around 25.7p higher per litre than before the United States and Israel launched strikes against Iran at the end of February.
Diesel prices have also increased significantly, rising by 43.5p a litre since February to an average of 185.92p.
The increases are likely to affect motorists travelling over the bank holiday weekend, while also adding pressure to inflation and household spending.
The temporary 5p cut to fuel duty was first introduced by the Conservative government in 2022 following Russia’s invasion of Ukraine and the resulting surge in energy prices.
Countries including France, Germany, Italy, Canada and Australia have already introduced measures to reduce fuel costs for motorists.
The Government has also eased sanctions on some Russian oil products in an effort to reduce pressure on fuel supplies and prices, a move that has drawn criticism from opposition parties and some Labour MPs.
Dame Emily Thornberry, chairman of the Commons foreign affairs committee, said Ukrainian officials had expressed disappointment at the decision.
Speaking on BBC Radio 4’s Today programme, she said:
“I have heard from people in Ukraine overnight and I know that they are very disappointed and are asking me why it is Britain is doing this.”
Jet fuel prices have also risen sharply since the Iran conflict began, increasing to around $150 a barrel.
