Chancellor of the Exchequer Rachel Reeves has confirmed that the government will freeze fuel duty until the end of the year.

It means maintaining the existing 5p-per-litre cut introduced after Russia’s invasion of Ukraine.

The latest fuel price rises come after Israel and the US attacked Iran, leading to the blocking of the Straits of Hormuz, the route of 20% of the world’s oil supplies.

Timing

The announcement comes as part of a broader package of support measures in light of huge hikes in fuel prices.

It means the temporary 5p fuel duty reduction, first introduced in 2022 after Russia invaded Ukraine, will remain in place rather than being phased out later this year, as previously planned.

The decision follows weeks of rising petrol and diesel prices linked to instability in the Middle East and concerns over global oil supplies after Israeli and American attacks on Iran.

Disrupted markets due to the effective closure of the Straits of Hormuz mean fuel prices have climbed to their highest levels since late 2022, intensifying political and economic pressure on ministers.

This week, the RAC Fuel Watch announced that the average price of a litre of petrol had surpassed £158, a new high.

Announcing the move, Reeves said the government was acting to protect households and businesses from further financial strain.

“I know that the cost of travelling to and from work is still too high,” the Chancellor said, adding that the freeze was designed to support “working people” facing continued pressure on living costs.

Prime Minister Keir Starmer also confirmed the planned rise would be scrapped for the rest of the year, alongside a temporary vehicle tax break for the haulage industry and a cut in duty on Red Diesel used by farmers.

Fuel duty rise

Fuel duty has effectively been frozen since 2011, apart from the temporary 5p cut introduced in March 2022 following Russia’s invasion of Ukraine, which itself caused oil prices to surge sharply.

Under previous Treasury plans announced in the 2025 Budget, the 5p reduction was due to be gradually removed from September 2026, with further inflation-linked increases planned from April 2027 onwards.

Allowing the temporary cut to expire would have increased the tax paid on petrol and diesel and added several pounds to the cost of filling a typical family car.

This would have added more pressure on households’ budgets and the wider economy, which is already under strain due to the military action in the Middle East, with no end in sight.

The Treasury had originally planned the increase because fuel duty revenues have been declining in real terms for years, partly due to improved fuel efficiency and the transition towards electric vehicles.

Fuel duty remains one of the government’s largest tax sources, generating around £25 billion annually.

Relief 

Motoring organisations welcomed the announcement, saying it would provide some relief for drivers already facing high insurance, repair and running costs.

Simon Williams, head of policy at the RAC, previously said drivers would be “relieved” whenever the government decided to maintain the fuel duty cut because many households remain heavily dependent on their cars.

“It’s good to see the Government recognising the importance of the car to millions of households,” he said in earlier comments on fuel duty policy.

Campaign group FairFuelUK had also been lobbying heavily for a continued freeze, warning that rising oil prices linked to tensions in the Middle East could add between 10p and 20p per litre to forecourt prices if disruption worsened.

Industry groups argued that increasing fuel duty now would have added further inflationary pressure by raising transport and delivery costs across the economy.

Balancing act 

While the move is likely to prove popular with drivers, it presents another challenge for the Treasury’s finances.

Successive governments have repeatedly postponed planned fuel duty rises due to the political sensitivity surrounding motoring costs.

According to Office for Budget Responsibility estimates cited in previous budget documents, the cumulative cost of fuel duty freezes since 2010 has reached tens of billions of pounds.

Critics argue repeated freezes undermine environmental goals by reducing incentives to move away from petrol and diesel vehicles.

Others say wealthier households benefit disproportionately because they typically drive more.

However, ministers appear to have concluded that increasing fuel taxes during a period of volatile oil prices and economic uncertainty would be politically difficult and would also be a negative intervention in an economy that is already struggling.

The freeze means fuel duty will remain at 52.95p per litre for now, helping motorists avoid an immediate rise in forecourt costs as households continue to face pressure from inflation and higher living expenses.

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