Fuel duty freeze extended until the end of the year

The 5p cut on fuel duty will be extended to the end of the year, instead of being phased out in September, the government has said.

The reduced tax rate for petrol and diesel was introduced by the previous Conservative government after Russia's full-scale invasion of Ukraine pushed prices up in 2022.

The price of petrol and diesel has risen significantly since the start of the US-Israel war in Iran, which has affected global supplies of oil and liquified natural gas.

"We're backing drivers by extending the freeze on fuel duty," Prime Minister Keir Starmer told the House of Commons.

Downing Street said the fuel duty freeze would cost £455m for the current tax year, with the PM's official spokesman saying the government had been able to freeze duty because of better economic growth figures.

Fuel duty was initially cut by 5p in the Spring Statement in March 2022, under the Conservative government. It was supposed to last 12 months, but has been repeatedly extended.

Starmer says he had decided to extend the freeze because of events in the Middle East.

The average price of petrol hit its highest level since the start of the Iran war on Monday - reaching 158.52p a litre, according to the RAC.

Starmer also announced plans to cut the fuel duty rate on red diesel by over a third, to 6.48p per litre from the middle of next month until the end of the year. That's expected to help farmers who use it in their tractors and other agricultural machinery.

He also announced a 12-month holiday on vehicle excise duty for HGVs, which the government said would help with the higher supply chain costs affecting the haulage industry which can impact on consumer prices.

The measure is expected to save hauliers around £600 for a typical heavy lorry.

But RAC head of policy Simon Williams said questions remained over what would happen next year.

"Will drivers be hit with the full 5p in one go in the spring, will a new phasing be agreed, or will the government even abandon an increase altogether?" he said.

Responding to the announcement, the Conservative leader Kemi Badenoch thanked Keir Starmer for the government's "U-turn" on fuel duty, which she said her party had called for in March.

Sir Mel Stride, shadow chancellor, claimed the government had been "forced into a U-turn" on fuel duty following pressure from Conservatives.

"Labour's fuel tax hike would have hurt businesses and hammered hardworking families already stretched to breaking point.

"Under the Conservatives, fuel duty was frozen or cut for 14 years in a row."

Additional reporting by Brian Wheeler