The fuel industry, campaigners and motorists have praised the Chancellor’s decision to scrap the fuel duty increase due in September.

In his Budget statement the Chancellor said he was cancelling the fuel duty increase “to support motorists and businesses”.

He said fuel duty will have been frozen for nearly three and a half years, and from April pump prices will be 13p per litre lower than they would have been under Labour’s previously announced plans.

The PRA chairman Brian Madderson welcomed the decision to cancel the fuel duty increase.

He said: “Taking into account the projection of RPI in the first quarter of 2014, combined with the current 20% VAT rate, this action will save the motorist up to 3ppl. This could even stem the continuing decline in overall retail fuel volumes, which according to last year’s Government statistics dropped by 2.9% compared to 2011.

“However with the Treasury benefiting from the tax windfall of higher VAT over the last two years on ever rising fuel prices, independent retailers had wanted this windfall to be used to cut fuel duty in this Budget. This was a view shared by many motoring organisations and trade bodies.

“It is clear that high fuel prices are a significant factor in the upward trend for inflation. They continue to take money out of consumers’ pockets thus weakening their spending power and stifle economic growth particularly for SMEs (small and medium size enterprises). The Chancellor has missed a golden opportunity to start correcting the penal 60% tax on retail road fuels.”

Robert Halfon MP, who has been one of the main campaigners in the Commons for lower fuel prices, said: “I am delighted. This was a cost of living Budget. It puts fuel in the tank of the British economy.

“I’m glad that the Chancellor has listened again, and helped millions of car-owners and businesses who are struggling to fill up their family car. Fuel duty is a toxic tax. It hits the poorest Brits the hardest.”

AA president Edmund King said: “A September fuel duty hike would have been the last straw likely to break UK drivers’ budgets and would have led to a summer of discontent. The freeze is a pragmatic move and will bring some relief at the pumps. Already 76% of AA members are cutting back on journeys, household expenditure or both, due to the high cost of fuel.

“With current fuel prices at 138.42p for petrol and 145.24p for diesel, drivers will welcome the scrapping of the fuel duty hike with relief rather than with joy. Prices are almost 5p a litre higher than when the Chancellor froze fuel duty in March 2011.”

Retailers also welcomed a decision to scrap the duty escalator on beer and reduce the rate by 1p.

ACS chief executive James Lowman said: “We welcome the decision to freeze beer duty, This will benefit consumers and reduce some of the pressure on local shops losing trade to the illegal market. It’s a shame this benefit will not be shared by customers buying wine, spirits and cider.”

Tobacco continued to experience above inflation duty increases however. Jorge da Motta, managing director of JTI in the UK, said: “The UK Government’s excessive tax on tobacco products puts the UK at the top of the criminals’ list of destinations for illicit tobacco.

“Today’s announcement of an increase of 5.3% will further encourage lawbreakers both large and small who will continue to deprive the Government in the UK of millions of pounds every day in uncollected duty.

“Despite the efforts of a broad alliance of HMRC, trading standards and tobacco manufacturers, the latest industry data shows that around one in five cigarettes smoked avoid UK duty and this represents a loss in revenue of £3bn.

“With proposals for plain packs being discussed we urge the Government not to introduce such a measure, which will push us over the tipping point and lead to communities across the UK becoming swamped with smuggled and counterfeit cigarettes.”

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