Rachel Reeves, the Labour Party’s Chancellor, is poised to confirm a crucial rule change that could save drivers up to £153 a year. This week, she is expected to announce the cancellation of a planned fuel duty increase that was set to rise by 1p in September, as part of a broader package aimed at reducing the overall cost of living.
According to government insiders, Ms Reeves may also scrap the entire 5p increase scheduled to be implemented incrementally over the following six months, effectively extending the current fuel duty freeze beyond its temporary status.
The Chancellor is anticipated to present this policy update to the House of Commons on Thursday. While the Prime Minister’s spokesperson refrained from commenting directly on the proposal, they emphasized the government’s commitment to keeping costs low for motorists, particularly in light of the ongoing geopolitical tensions caused by the war in Iran.
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“The government has already extended the 5p fuel duty cut twice, up to September,” the spokesperson noted. “The Chancellor will continue to monitor price developments, although a swift de-escalation in the Middle East remains pivotal to controlling pump prices.”
Analysis from the Social Market Foundation highlights the impact of this move on different income groups. Should the chancellor make the 5p fuel duty cut permanent rather than temporary, the lowest income households could save around £56 annually, equating to approximately £4.66 per month. The average household is forecasted to save about £119 per year, or £10 per month. Notably, wealthier households, which typically own more vehicles and drive more frequently, stand to benefit the most—saving up to £153 annually.
Richard Walker, executive chair of supermarket chain Iceland and the government’s cost of living champion, underscored the importance of reassessing fuel duty in an interview on BBC Radio 4’s Today programme. “The 5p fuel duty cut is due to expire in September,” he said. “Given current conditions, it’s vital we consider extending or expanding this relief.”
This anticipated freeze on fuel duty rises represents a significant step by the Labour Chancellor to alleviate financial pressures on drivers amidst broader economic challenges.