A planned increase in fuel duty has been scrapped to help motorists faced with rising pump prices as a result of the war in Iran.
Government Extends Fuel Duty Cut
Prime Minister Sir Keir Starmer told MPs the 5p per litre fuel duty cut introduced by the Conservative government in March 2022 would be extended for the rest of the year. That means the rate will remain nearly 53p per litre.
Rates were previously planned to increase by 1p per litre on September 1, with a pair of 2p per litre rises on December 1 this year and March 1 next year.
Impact of Iran Conflict on Fuel Prices
Iran’s restrictions on tankers passing through the Strait of Hormuz means the average price of a litre of petrol and diesel at UK forecourts is 26p and 44p respectively more expensive than before the conflict started on February 28.
Sir Keir said: “Families across the United Kingdom are facing impacts of a war that we did not choose.” He added: “This is not our war, but while the parties opposite wanted to jump into it, Labour will always protect working people.”
RAC Foundation Reaction
Steve Gooding, director of motoring research charity the RAC Foundation, said: “Although today’s news on fuel duty won’t have the immediate effect of bringing forecourt prices down, at least it shows that ministers have registered the financial pain caused by rampant pump prices for individuals and for business.
“Since the start of the Iran conflict, drivers have already paid a war premium of a staggering £3 billion in inflated fuel prices, half-a-billion of which has gone to the Exchequer in VAT receipts.”
Support for Hauliers and Farmers
Sir Keir also announced that hauliers would benefit from a “12-month road tax holiday”. The Treasury said they would pay £1 at their annual renewal, saving £600 for a typical heavy lorry and £912 for the biggest vehicles on the road.
Farmer, rail freight and other users of red diesel will see their fuel duty cut as part of an effort to reduce costs of goods. The rate will be cut from 10.18p to 6.48p per litre from June 15 until the end of the year.
Cost and Future Outlook
Downing Street indicated the package of measures will cost £455 million. “The package will be scored at the Budget by the independent Office for Budget Responsibility,” the Prime Minister’s official spokesman told reporters. “The Government estimates this will cost £455 million in 26-27.”
He said it was thanks to the UK’s “strong economic growth” that the Government could introduce measures to ease cost-of-living pressures. “Given the current impact of the conflict, it is right to extend the 5p cut to the end of this year,” the spokesman said.
It is not yet clear the 5p freeze will be extended beyond the end of 2026, meaning motorists could be hit in the new year. Chancellor Rachel Reeves is expected to set out future plans for fuel duty in the budget in the autumn.
