The Prime Minister has announced September’s scheduled fuel duty rise will not go ahead, a move designed to reduce the impact of rising fuel costs brought about by the Iranian conflict, confirming reports earlier in the week.
The increase was set to come about by way of an end to the 5ppl discount introduced in 2022 to offset increased petrol and diesel prices brought about by global conflict – this one in Ukraine – and was to be ended with a 1ppl rise in September, followed by tuppence increases in December and March.
But Keir Starmer confirmed in the House of Commons today that the discount will not be wound down for at least seven months, promising that the tax will be frozen at 52.95p “for the rest of the year”.
Starmer also announced a 12-month road-tax “holiday” for HGVs, while duty on red diesel – reserved for agricultural, forestry, railway and a handful of other uses – will be cut by over a third until the end of 2026.
A statement released by the Prime Minister read: “I know many are feeling the pressure of energy and fuel costs, and are worried about how the conflict in Iran will affect their finances. Because when global events drive up prices, it’s working people who feel it first. That’s why this government is stepping in to keep fuel costs down for millions of drivers and putting money back in the pockets of working people.”
Chancellor Rachel Reeves, meanwhile, said: ”I am stepping in to protect people at the pump.”
Such concessions might be intended to convey sympathetic generosity from benevolent leaders, but the Treasury has been enjoying a vast increase in tax receipts as fuel prices have risen.
Government coffers have swelled by an additional £60m a month thanks to VAT takes increasing alongside petrol and diesel prices, while VAT tax is even applied to fuel duty itself. The result is that over 50% of the price of a litre of fuel is made up of pure tax, often paid for out of already taxed income.
Responding to the duty-freeze announcement, Paul Holland of Corpay, which owns Allstar, described it as “welcome news” that “will offer some much-needed breathing space for businesses”, but said the measure “doesn’t solve the underlying challenge that fuel remains one of the biggest operational costs for fleets”.
Simon Williams of breakdown and insurance company the RAC asked: “The big question is now: what will happen next year and 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?”
