Rachel Reeves axes fuel duty hike: drivers spared September pain at a cost of £2.4bn
The 5p cut to fuel duty won’t be unwound in September as planned, but could still go ahead next year
Chancellor Rachel Reeves is set to abandon plans to ‘unwind’ the ongoing temporary 5p cut to fuel duty. The move, expected to be announced on Thursday, will come at the cost of £2.4billion to the taxpayer, but save already cash-strapped drivers from even more pain at the pumps.
Ever since Reeves announced that the temporary 5p cut to fuel duty – something that was introduced in March 2022 by the previous Conservative government to alleviate pressure on drivers following the start of the Russo-Ukraine war – would be unwound, the decision has been met with fierce criticism from the opposition.
The original plan would have seen the cut ‘unwound’ from September 2026, thus reducing it to 4p per litre. From December this would shrink further to 2p, with the discount being removed altogether the following March. This would only add to the pain of already-high petrol costs in light of the conflict in Iran; at the time of writing, RAC Fuel Watch says the average price of petrol and diesel sits at 157.99p and 186.64p per litre, only slightly down from a high of 158.31p and 191.54p in mid-April.
Yet following the announcement by the Office for National Statistics (ONS) last week, Reeves remarked: “Next week, I will be able to set out more plans to support families and businesses with the challenges that have come from this conflict in the Middle East. I look forward to setting those out”.
In anticipation of Thursday’s announcement, Conservative shadow chancellor Mel Stride MP told Auto Express: “Labour’s fuel tax hike would hurt businesses and hammer hardworking families already stretched to breaking point. After Conservative pressure, it looks like Reeves may finally be forced into a U-turn.”
All of this is not to say the temporary cut to fuel duty has been made permanent; it’s likely Reeves will recommence the process of unwinding the discount in next March’s Spring Statement. Furthermore, the following month, fuel duty is set to begin its annual inflationary rise – in this case, by 2p per litre.
HM Treasury has declined to comment.
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