Rachel Reeves has abandoned her planned fuel duty rise after months of pressure from the Conservatives and a sharp increase in petrol prices.
The Chancellor had intended to raise fuel duty by 5p a litre in September, ending a freeze that has remained in place for 15 years. But after a sustained Tory campaign warning that the move would hammer struggling families and businesses, Labour was forced into a major U-turn.
Sir Keir Starmer confirmed on Wednesday that fuel duty will now remain frozen until the end of 2026 as ministers scramble to contain the growing cost of living crisis.
The Prime Minister announced the decision during Prime Minister’s Questions, alongside a 12 month road tax holiday for hauliers aimed at keeping transport and supermarket prices down.
Sir Keir told the Commons: “We’re giving our hauliers a 12 month road tax holiday, helping to keep prices down, and we’re backing drivers by extending the freeze in fuel duty for the rest of the year.
“This is possible because of the decisions taken by the Chancellor, making us the fastest growing economy in the G7.”
The reversal represents a significant climbdown for Ms Reeves, who had repeatedly resisted calls to scrap the increase despite mounting concern over rising fuel costs.
Senior Conservatives claimed Labour had finally bowed to pressure after weeks of warnings that the increase would deepen the squeeze on household budgets during an escalating international energy crisis.
Sir Mel Stride, the shadow chancellor, said: “Labour’s fuel tax hike would have hurt businesses and hammered hard working families already stretched to breaking point.
“For months I’ve been calling for Reeves to axe her fuel tax hike. After Conservative pressure, Reeves has finally been forced into a U-turn.
“Under the Conservatives, fuel duty was frozen or cut for 14 years in a row. Labour wanted to put it up during a cost of living crisis. That tells you everything. Families can’t afford Labour.”
The Conservatives have sought to contrast Labour’s approach with the previous Tory government’s decision to introduce a temporary 5p cut in fuel duty in 2022 following Russia’s invasion of Ukraine.
Fuel prices have surged in recent weeks after conflict in Iran disrupted global energy markets. The average price of unleaded petrol reached 158.52p a litre on Tuesday, the highest level since late 2022.
Petrol now costs 25.7p more per litre than before the United States and Israel launched strikes against Iran at the end of February.
Diesel prices have risen even more sharply, climbing by 43.5p a litre since February to an average of 185.92p.
The latest increases are expected to hit millions of motorists travelling over the bank holiday weekend and add further pressure to inflation.
Countries including France, Germany, Italy, Canada and Australia have already cut taxes on petrol and diesel in response to soaring energy prices.
The Government has also eased sanctions on Russian oil products, allowing some imports of diesel and jet fuel refined from Russian crude in an attempt to lower costs.
The move has triggered criticism from opposition parties and some Labour MPs. Dame Emily Thornberry, chairman of the Commons foreign affairs committee, said Ukrainian officials had expressed disappointment with the decision.
Speaking on BBC Radio 4’s Today programme, she said: “I have heard from people in Ukraine overnight and I know that they are very disappointed and are asking me why it is Britain is doing this.”
Jet fuel prices have more than doubled since the Iran conflict began, rising to around $150 a barrel.
