Fuel duty will rise by 1.25 pence per litre from midnight tonight (December 6) the Chancellor has announced in his pre-Budget report.

The inflation rise ends the three-year freeze on fuel duty, however, Gordon Brown said he would not restore the fuel duty escalator and had rejected a real-terms increase.

Ray Holloway, director of the Petrol Retailers Association (PRA), said he had expected the increase but added: “It is yet another revenue-raising exercise by the Government, which will hit industry and all road transport users.”

Although current tax discounts for bio fuels are to be extended until 2008/09, Holloway expressed disappointment that the Government had again offered no financial incentives to petrol retailers to invest in bio-fuels. Branding it an “opportunity missed”, he said: “If the government wants a quick win with bio-fuels then they need to do something to help bring them to market sooner. This is vital if these new fuels are to be made readily available to consumers at UK forecourts.”

Giving his reaction to the report, James Lowman, chief executive of the Association of Convenience Stores (ACS) said: “The rise in fuel duty is being seen in terms of its environmental impact, but we see it as yet another blow to the forecourt convenience store operators who make very little money from the sale of fuel.”

Meanwhile, the LP Gas Association said it was pleased to see continued support for LPG through low fuel duty. A duty increase of 2.25ppl confirmed the Government’s commitment that the differential between LPG and standard fuel would reduce by a maximum of only 1p per year, ensuring the price at the pump will continue to be around half the price of petrol and diesel.