The government has scrapped a planned increase in fuel duty to help motorists cope with soaring pump prices caused by the conflict in Iran.
Extension of Fuel Duty Cut
Prime Minister Sir Keir Starmer announced to MPs that the 5p per litre fuel duty cut, originally introduced by the Conservative government in March 2022, will be extended for the remainder of the year. This means the rate will stay at nearly 53p per litre, rather than rising by 1p on September 1, followed by two 2p increases on December 1, 2026, and March 1, 2027.
Impact of Iran Conflict
Iran's restrictions on tanker movements through the Strait of Hormuz have pushed the average price of petrol and diesel at UK forecourts up by 26p and 44p per litre respectively since the conflict began on February 28. Sir Keir stated: "Families across the United Kingdom are facing impacts of a war that we did not choose." He added: "This is not our war, but while the parties opposite wanted to jump into it, Labour will always protect working people."
Industry Reactions
Steve Gooding, director of the RAC Foundation, noted: "Although today’s news on fuel duty won’t have the immediate effect of bringing forecourt prices down, at least it shows that ministers have registered the financial pain caused by rampant pump prices for individuals and for business." He highlighted that drivers have already paid a war premium of £3 billion in inflated fuel prices, with £500 million going to the Treasury in VAT receipts.
Jack Cousens, head of roads policy at the AA, said the announcement "gives an opportunity for the Government’s Fuel Finder scheme to show its value, by showing drivers where to find the best prices."
Support for Hauliers
Sir Keir also announced a "12-month road tax holiday" for hauliers, allowing them to pay just £1 at their annual renewal. This will save £600 for a typical heavy lorry and £912 for the largest vehicles. Richard Smith, managing director of the Road Haulage Association, commented: "We are encouraged that the Government is listening to industry concerns, and addressing cost pressures through measures they’ve announced today. But they should go much further," adding that many operators are already on the brink.
Current Pump Prices
The RAC reported on Tuesday that the average petrol price was 158.5p per litre, the highest since December 2022, and warned that wholesale costs could push prices to at least 160p per litre in the coming weeks.
Red Diesel Duty Cut
Farmers, rail freight operators, and other users of red diesel will see their fuel duty cut from 10.18p to 6.48p per litre from June 15 until the end of the year, aiming to reduce goods costs.
Cost of Measures
Downing Street indicated the package will cost £455 million, to be scored by the Office for Budget Responsibility at the next Budget. The Prime Minister's spokesman said the government could introduce these measures thanks to "strong economic growth." However, it remains unclear whether the 5p cut will be extended beyond 2026, with Chancellor Rachel Reeves expected to outline future fuel duty plans in the autumn Budget.
