By james art Fuel duty is a tax that affects anyone who wants to buy fuel for their car, as well as people who want to heat their home.
It has not risen for more than a decade and was frozen between 2012 and 2022 before being cut by 5p in March 2022 when pump prices jumped following Russia’s invasion of Ukraine.
Rachel Reeves said it would be the “wrong choice” to increase fuel duty next year, saying she would continue the freeze and keep the temporary 5p cut for another year.
She told MPs she had to “make some very difficult decisions” on tax and noted that keeping the 5p cut and re-freezing fuel duty would cost more than £3bn next year.
The chancellor said: “At a time when the fiscal position is so difficult, I have to be frank with the House that this is a significant commitment that I have to make.
“I have come to the conclusion that in these difficult circumstances, while the cost of living remains high and amid global uncertainty, increasing fuel duty next year would be the wrong choice for working people.
“This would mean a 7p per liter increase in duty on fuel. So today I have decided to freeze fuel duty next year and will keep the existing 5p reduction for another year as well. There will be no higher taxes at gas stations next year.”
Speaking last month, the AA highlighted the impact the fuel duty was having on drivers.
AA president Edmund King said: “Pure and simple, the only reason pump prices are near a three-year low this week is because of the 5p cut in fuel duty.
“Abolishing it threatens to throw millions of low-income drivers back into an era of perpetually high fuel prices on the road.”
“Abolishing fuel duty cuts unleashes a shock of £3.30 per tank on the personal and family budgets of the 28% of drivers who spend a certain amount when they go to a petrol station.
“That’s more than nine million private motorists – most of whom are on low incomes and struggling to balance their budgets.”
Opening the Budget this afternoon, Ms Reeves said: “On July 4, the country voted for change. This government was given a mandate. To restore stability to our country and begin a decade of national renewal.
“To fix the foundations and achieve change through responsible leadership in the national interest.” This is our task. And I know we can achieve it.”
She said her “faith in Britain burns brighter than ever” but “the only way to drive economic growth is to invest, invest, invest”.
“There are no shortcuts. And to secure that investment, we need to restore economic stability and turn the page on the last 14 years.”
What is a fuel charge and how does it work?
Fuel tax is a tax levied on purchases of petrol, diesel and any other fuel source for vehicles and heating.
According to the Office for Budget Responsibility, this represents a “significant source of revenue” for the Treasury, raising around £25bn in 2023 and 2024.
Fuel duty is taxed per unit of fuel at the rate paid by those in the UK depending on the type of fuel.