Chancellor Rachel Reeves is expected to announce this week that she will cancel a planned 1p rise in fuel duty, which was due to take effect in September, as part of a package to reduce the cost of living. Government sources indicate that Reeves may also scrap a further 5p increase scheduled over the following six months, saving motorists an estimated £2.4bn a year.
The move comes amid rising inflation linked to the war in Iran. Reeves will outline her plan to the Commons on Thursday, aiming to keep pump prices low for motorists. The prime minister's spokesperson declined to comment on the specifics but stated that the government is committed to reducing costs for drivers affected by the conflict.
Reeves had previously frozen fuel duty for nine months at the last budget, with the temporary 5p cut—first introduced by Rishi Sunak in 2022 after Russia's invasion of Ukraine—set to expire in September. Pressure has mounted from figures such as Richard Walker, executive chair of Iceland and the government's cost of living champion, who advocated for extending the cut.
Other options considered by Reeves include freezing private sector rents and subsidising energy bills, but a rent freeze has been ruled out. An energy bill relief package is expected later in the year, as the price cap is fixed until June. Reeves has already allocated £50m to subsidise heating oil for families, particularly in rural areas and Northern Ireland.
The announcement comes amid political uncertainty, with Greater Manchester mayor Andy Burnham preparing to challenge Keir Starmer for Labour leadership, focusing on affordability issues.
