Rachel Reeves has been praised by some and criticised by others as she unveiled fuel duty rates in the new Budget. The Chancellor had been expected to raise them for motorists paying at the pump as she sought to raise funds to fill what she calls a £22 billion black hole in the public finances.
Yet after weeks of fear and anxiety from UK motorists, the Chancellor let them off the hook. She told MPs it would be the “wrong choice” to raise rates.
It had been speculated that there could be a 7p per litre rise to fuel duty in today’s Budget. Yet Labour says that not only has the Chancellor continued the freeze the Conservatives put in place – she has also pledged to maintain the temporary 5p cut for another year.
The Chancellor said the move would cost £3 billion. Yet she added: “There will be no higher taxes at the petrol pumps next year.”
She 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.”
The move from Reeves means the 5p per litre cut in fuel duty introduced by the Conservative government in March 2022 will continue. Until that 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. Government data shows the average cost of a litre of petrol and diesel at UK forecourts is around £1.34 and £1.40 respectively.
What is the reaction to the fuel duty freeze?
Predictably, driver groups are delighted. Yet environmental campaigners have critised the impact the move will have.
Gordon Wallis from Your NRG said the freeze will provide some “immediate and tangible relief”. He explained: “In practical terms, this means that petrol and diesel prices are less likely to spike at the pump in the coming year, providing stability at a time when household budgets are already stretched.
“For the average driver, the freeze will translate into an estimated annual saving of around £60. This may seem modest, but for those reliant on their vehicles for daily commutes and essential travel, these savings add up. This decision also benefits the 80% of drivers who report being dependent on their cars for regular transport needs, especially in areas with limited public transit options.”
Howard Cox, Founder of FairFuelUK, celebrated the announcement, adding: “I am delighted that Rachel Reeves has listened to FairFuelUK supporters and her Party MPs’ constituents. She finally recognises that keeping Fuel Duty frozen is at the core of a laudable journey to economic growth.”
However, after a brief victory, the expert urged the Chancellor not to “rest on your laurels”. He urged her to use this as momentum to create the “first-ever road-user transport strategy that benefits the economy”.
AA president Edmund King said: “In this eve-of-Halloween Budget, the Chancellor has conjured up a treat for drivers. Since Covid and the start of the Ukraine war, perma-high pump prices have inflicted road fuel costs that were well above anything motorists had endured before.”
RAC head of policy Simon Williams said: “It’s good to see the Government firmly recognising the importance of the car to millions of households up and down the country. Eight in 10 drivers tell us they are dependent on their vehicles for the journeys they need to make.”
The RAC Foundation says tax makes up around 55% of pump prices. Director Steve Gooding said: “Tens of millions of drivers will be breathing sighs of relief.
“We shouldn’t feel too sorry for the Chancellor. She still gets well over half of everything paid at the pumps in a combination of fuel duty and VAT.”
Yet Hirra Khan Adeogun, co-director of climate charity Possible, said freezing fuel duty is “completely the wrong thing to do”. She said: “Fuel duty will now be frozen for 15 years, while the cost of public transport has gone up and up each and every year.
“This is completely the wrong way around, and we need to move to a system which makes the greenest ways of getting around the cheapest and most convenient.”