Fuel duty will be frozen next year at a cost to the Treasury of more than £3 billion, Chancellor Rachel Reeves has announced.
In her Budget speech to the Commons, Ms Reeves said this was a “substantial commitment” but insisted raising taxes on fuel would be “the wrong choice for working people”.
This means the 5p per litre cut in fuel duty introduced by the Conservative government in March 2022 will continue.
Until the 5p cut, fuel duty had been frozen at 57.95p per litre since March 2011.
VAT is charged at 20% on top of the total price of fuel.
Ms Reeves said: “To retain the 5p cut and to freeze fuel duty again would cost over £3 billion next year.
“At a time when the fiscal position is so difficult, I have to be frank with the House that this is a substantial commitment to make.
“I have concluded that in these difficult circumstances – while the cost of living remains high and with a backdrop of global uncertainty – increasing fuel duty next year would be the wrong choice for working people.
“It would mean fuel duty rising by 7p per litre. So, I have today decided to freeze fuel duty next year and I will maintain the existing 5p cut for another year, too.
“There will be no higher taxes at the petrol pumps next year.”
Government figures show the average cost of a litre of petrol and diesel at UK forecourts is around £1.34 and £1.40 respectively.