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Chancellor Rachel Reeves is expected to announce the end of a temporary 5p cut in fuel duty in her Budget this month, it has been reported.
Sources briefed on the chancellor’s thinking told The Financial Times that they believe the cut will take effect from next year. Additionally, the Treasury department has urged Ms Reeves to end a 13-year freeze on fuel duty, according to the paper.
As Ms Reeves seeks to address a £22bn “black hole” in public spending announced in late July, the Campaign for Better Transport estimates that ending the 5p cut and reinstating annual inflation-linked rises could generate £4.2bn in revenue for the Treasury.
However, motoring groups have warned that such a move would be “catastrophic for many”.
More than 70 Tory MPs have also written a letter to the chancellor, saying any increase in fuel duty would slow economic growth and add an estimated £160 to annual fuel costs for families, reports The Sun.
The measure was initially introduced in 2022 following the surge in energy prices triggered by Russia’s full-scale invasion of Ukraine and has been maintained by successive chancellors since.
Currently, fuel duty stands at 52.95p per litre for petrol and diesel. While it is supposed to rise annually in line with inflation, it has effectively been frozen since 2011 as successive chancellors sought to win favour with motorists.
In the last budget published in March under the previous Conservative government, the latest cancellation of the scheduled fuel duty rise cost around £3bn for 2024-25.
On Friday, the Road Haulage Association (RHA) urged Ms Reeves to maintain the current freeze, arguing that businesses are already struggling to cope with squeezed profit margins.
“Firms are under pressure as it is, and such a rise in fuel duty would be catastrophic for many, particularly Britain’s small and medium enterprises,” said Richard Smith, managing director of the RHA.
A Treasury spokesperson commented: “We do not comment on speculation around tax changes outside of fiscal events.”