Rachel Reeves is set to announce the cancellation of a planned increase in fuel duty this week as part of a broader initiative aimed at alleviating the financial burden on households.
According to government insiders, the Chancellor will reveal that the anticipated 1p rise, scheduled for September, will not take place. Additionally, she may eliminate a proposed 5p increment that was to be implemented gradually over the following six months.
This decision is aligned with a comprehensive strategy to address inflationary pressures stemming from the ongoing conflict in Iran. Reeves is expected to present these measures to the House of Commons on Thursday.
While the Prime Minister’s spokesperson refrained from commenting specifically on the forthcoming plans, which were initially reported by the Sun on Sunday, he emphasized the government’s commitment to managing costs for drivers who are facing higher expenses due to the situation in Iran. He noted, “We have already extended the 5p fuel duty reduction twice, until September. The Chancellor will keep monitoring the situation, but a swift de-escalation in the Middle East remains the most effective way to maintain lower fuel prices.”
The Treasury chose not to provide any comments on the matter.
In her previous budget announcement, Reeves had indicated a freeze on fuel duty for nine months but also mentioned the conclusion of a temporary 5p cut—first introduced by Rishi Sunak in 2022 following Russia’s invasion of Ukraine—beginning this September.
Recently, she has faced mounting pressure to prolong the 5p cut, which is estimated to cost the government approximately £2.4 billion annually. Richard Walker, the executive chair of Iceland and the government’s cost of living champion, recently stated on BBC Radio 4’s Today programme, “The impending expiration of the 5p fuel duty cut is noteworthy. Given the current circumstances, we should be considering and discussing its extension or enhancement.”
Over the past few weeks, Reeves has explored various measures to help keep prices down, including proposals to freeze private sector rents and provide subsidies for certain energy bills. However, officials reportedly dismissed the idea of a rent freeze, and it is anticipated that Reeves will delay any announcement regarding energy bill relief until later this year, as the price cap remains unchanged until the end of June.
Sources within the government suggest that, due to significantly reduced energy consumption in winter, the Chancellor prefers to wait until later in the year before determining the extent of funding for bill subsidies. She has already allocated £50 million to assist families using heating oil, particularly in more rural areas such as Northern Ireland.
Reeves’ announcement comes at a time of considerable uncertainty for the government, as Greater Manchester Mayor Andy Burnham is campaigning in the Makerfield by-election with the intention of challenging Keir Starmer for the Labour leadership.
Burnham has made affordability a central theme of his campaign, stating at an event in Manchester on Monday, “Four decades of neoliberalism have resulted in an economy that fails to serve most working individuals, forcing them to pay excessively for essential daily needs such as energy, housing, water, and transportation.”
