Reports suggest that the Chancellor will announce the end of a temporary five-pence reduction in fuel duty as part of a broader strategy to address fiscal pressures

In a significant move that could affect motorists across the UK, Chancellor of the Exchequer Rachel Reeves is expected to announce the cancellation of a temporary five pence cut in fuel duty during her upcoming budget presentation. This revelation, reported by the Financial Times, has sparked discussions about the government’s approach to fuel taxation and its broader economic implications.

Sources familiar with Reeves’ views have indicated that the Chancellor is also under pressure from the Treasury to end a prolonged freeze on fuel duty that has remained in place since 2011. This freeze, with the exception of a temporary reduction during the 2022/23 tax year, was initially implemented amid concerns of public backlash, particularly from drivers in rural areas who rely heavily on motor vehicles for transportation.

The implications of such a decision could be substantial. The last budget, released under the previous Conservative government in March, highlighted that maintaining the recent freeze on fuel duty resulted in a substantial cost to the treasury, amounting to approximately £3 billion ($3.9 billion) for the fiscal year 2024/25. By scrapping the five pence cut, Reeves aims to help close this budget gap while navigating the complex political landscape surrounding fuel taxation.

The anticipated announcement comes at a time of heightened scrutiny over fiscal policy, particularly as the government grapples with the aftermath of rising living costs and inflation. While the Treasury has refrained from commenting on speculation regarding tax changes ahead of fiscal events, the pressure to address the national budget shortfall is palpable.

As Chancellor, Reeves is tasked with balancing the need for revenue against the potential dissatisfaction of the electorate. Any increase in fuel duty is likely to face criticism, particularly from motorists already feeling the pinch from soaring fuel prices and cost-of-living challenges.

The outcome of Reeves’ budget announcement is expected to be a pivotal moment in shaping the government’s fiscal strategy. With rising public scrutiny over tax policies and their impact on daily life, the Chancellor will need to communicate a clear rationale for any changes, particularly if they involve increasing costs for consumers.

As motorists brace for potential changes, the upcoming budget will serve as a critical test of Labour’s approach to managing public finances while remaining sensitive to the economic pressures faced by working families.

FINANCIAL TIMES

In the lead-up to the anticipated Budget announcement, motoring organisations are raising alarms over the possibility of a fuel duty rise. They argue that increasing taxes on fuel could reignite inflation and further strain household budgets already grappling with the rising cost of living.

The Chancellor, Rachel Reeves, is under pressure to find new sources of revenue to address a projected £40 billion funding gap. However, increasing fuel duty, which was previously frozen, could backfire. Motoring groups warn that such a move could exacerbate inflationary pressures across various sectors, impacting not just drivers but the economy as a whole.

The Road Haulage Association (RHA) cautioned that higher fuel costs would inevitably be passed down the supply chain, leading to increased prices for goods and services. This scenario could undermine the government’s efforts to stabilise the economy and provide much-needed relief to consumers.

As discussions intensify regarding potential tax increases and spending cuts, the implications of a fuel duty rise are becoming a focal point for both policymakers and the public. The chancellor’s upcoming Budget will undoubtedly be scrutinised not just for its fiscal prudence but also for its impact on inflation and everyday life for UK residents.

With households already feeling the pinch, the decision on whether to increase fuel duty could have far-reaching consequences, prompting motoring groups to call for a reconsideration of the approach towards fuel taxation in the context of the broader economic recovery.

BBC

As the Labour government prepares for its inaugural Budget, rural communities are expressing apprehension about a possible increase in fuel duty. With limited public transport options and dependence on personal vehicles, residents fear that higher fuel prices could significantly disrupt their daily lives.

In Pateley Bridge, a market town in the Yorkshire Dales, locals are particularly anxious. The town has only one petrol station, and with no train service and minimal bus routes, residents heavily rely on their cars. Elaine Graham, a retiree living in the nearby Fell Beck, emphasised that rising fuel costs would force her to reduce her trips, leaving her feeling “cut off and isolated.” With a fixed pension and increasing living expenses, she worries about maintaining her social connections and the broader implications of the Budget, including cuts to the winter fuel allowance.

The tourism sector in rural areas is also under threat. Ian Walker, who runs the Studfold caravan park and adventure trail, highlighted how higher fuel costs could deter visitors. He noted that the scenic beauty of the area attracts families seeking outdoor experiences, but increased travel expenses could lead to a decline in tourism. Walker urged the government to consider support for rural businesses, as they already face higher fuel prices due to delivery costs, making it challenging to remain competitive with urban centres.

Residents and business owners alike are calling for attention to the unique challenges faced by rural communities, particularly as the government deliberates on fiscal policies that could have far-reaching consequences for their livelihoods.

THE GUARDIAN

As the Labour government gears up for its first Budget, reports suggest that fuel duty could increase by as much as 7p a litre. This anticipated rise comes amid calls from environmental and transport campaigners for the Chancellor, Rachel Reeves, to make motoring costs more comparable to public transport rates.

Treasury officials are reportedly urging Reeves to reinstate inflationary increases on fuel duty and end the temporary cut initiated by former Chancellor Rishi Sunak in 2022. With petrol prices currently averaging about 135p per litre—significantly lower than the 146p price at the beginning of 2022—officials believe it is an opportune moment to act. The existing fuel duty stands at 52.95p per litre, generating approximately £25 billion annually for the government.

Campaigns against fuel duty by motoring groups have been prominent, particularly as previous governments have scrapped planned increases since 2010. A Whitehall source indicated to the press that “it’s now or never on fuel duty,” suggesting that the public is financially capable of absorbing the increase, but that future hikes may face greater resistance.

The Campaign for Better Transport argues that reinstating the previous cuts and implementing an inflationary increase could generate an additional £4.2 billion in revenue. Silviya Barrett, the campaign director, highlighted the current disparity in costs, noting that it is often cheaper to drive or fly domestically than to use trains.

The impact of duty freezes on greenhouse gas emissions has also been scrutinised. Since 2010, these freezes have potentially increased emissions by 7%, according to Carbon Brief, as drivers have continued using petrol and diesel vehicles rather than switching to more sustainable options. However, organisations like Fair Fuel UK warn that higher duties could disproportionately affect lower-income motorists. New research indicates that wealthier households have reaped more benefits from reduced fuel duty, highlighting a significant disparity in savings based on income levels.