The government has announced that the 5p reduction in fuel duty will remain in place until the end of the year rather than ending in September as previously planned.
The lower tax rate on petrol and diesel was first introduced by the previous Conservative administration in 2022 after Russia’s invasion of Ukraine triggered a sharp rise in fuel prices.
Fuel costs have climbed again since the outbreak of the US-Israel conflict involving Iran, which has disrupted global oil and liquefied natural gas supplies.
“We are supporting motorists by keeping the fuel duty freeze in place,” Prime Minister Keir Starmer told the House of Commons.
According to Downing Street, extending the fuel duty freeze will cost £455 million during the current tax year. The Prime Minister’s official spokesperson said the government was able to maintain the freeze due to stronger economic growth figures.
The 5p cut was originally introduced during the Spring Statement in March 2022 under the Conservative government. Although it was initially expected to last for one year, it has since been extended several times.
Starmer explained that the latest extension was influenced by developments in the Middle East.
Data from the RAC showed that the average cost of petrol reached 158.52p per litre on Monday, the highest level recorded since the conflict involving Iran began.
The Prime Minister also revealed plans to reduce the fuel duty charged on red diesel by more than one-third, lowering it to 6.48p per litre from the middle of next month until the end of the year. The measure is expected to provide relief for farmers who rely on the fuel for tractors and agricultural equipment.
In addition, the government announced a 12-month suspension of vehicle excise duty for heavy goods vehicles (HGVs), a move officials say will help offset rising supply chain expenses affecting the haulage sector and consumer prices.
The initiative is expected to save transport operators about £600 for a standard heavy lorry.
However, RAC head of policy Simon Williams said uncertainty remains over what will happen after this year.
He questioned whether drivers would face the full 5p increase next spring, whether a phased approach would be introduced, or if the government might abandon plans for any increase altogether.
Reacting to the announcement, Conservative leader Kemi Badenoch thanked Starmer for what she described as a government “U-turn” on fuel duty, noting that her party had pushed for the extension back in March.
Shadow Chancellor Mel Stride also claimed Labour had been “forced into a U-turn” following pressure from Conservatives.
He argued that a fuel duty increase would have placed additional strain on businesses and households already facing financial difficulties.
Stride added that fuel duty had either been frozen or reduced continuously throughout the Conservatives’ 14 years in government.