Fuel duty will remain frozen for another year as increasing the tax “would be the wrong choice for working people,” the chancellor has said.
In her first budget, Rachel Reeves announced the duty will remain at its current rate, which varies for different fuel types.
The headline rate on standard petrol and diesel currently stands at 52.95p per litre. This includes a temporary 5p cut introduced by the previous government, which will also remain in place.
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Keeping the freeze comes at a significant cost to the Treasury with the Office for Budget Responsibility (OBR) saying the cost of doing so from 2010/11 to 2025/26 will total £100bn.
Abolishing the cut and unfreezing the rate would have meant fuel duty rising by 7p per litre, the chancellor said.
The move, which means drivers won’t see an increase in tax at the petrol pump, will be a “relief” for many, according to the RAC Foundation – but it hasn’t gone down well with environmental campaigners.
Steve Gooding, the RAC Foundation’s director, said: “Tens of millions of drivers will be breathing sighs of relief.
“We shouldn’t feel too sorry for the chancellor. She still gets well over half of everything paid at the pumps in a combination of fuel duty and VAT.”
Caroline Lucas, the former leader of the Green Party, was among those who criticised the decision.
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In a post on X, Ms Lucas said the government’s decision to keep the freeze while raising the nationwide bus fare cap by 50% was “utterly nonsensical”.
She continued: “What happened to promoting public transport? And all the Green rhetoric? Cost of capping bus fares at £2 tiny compared with revenue lost through freeze.”
Hirra Khan Adeogun, the co-director of climate charity Possible, has said maintaining the freeze is “completely the wrong thing to do”.
She said: “Fuel duty will now be frozen for 15 years, while the cost of public transport has gone up and up each and every year.
“This is completely the wrong way around, and we need to move to a system which makes the greenest ways of getting around the cheapest and most convenient.”