Major cost of living boost as fuel duty to be frozen once again

It comes as Rachel Reeves struggles to find solutions to fill her fiscal ‘black hole’, as many expect tax rises in the upcoming budget.

But a rise in fuel prices seems less likely, as The i Paper revealed Treasury sources are pleased with their decision to maintain the freeze in October, amid intensifying cost of living pressures.

The freeze is considered an example of how the Government has been “front-footed” in their approach to the cost of living crisis, as it eases a significant burden on thousands of households.

This is despite fuel duties constituting a major source of revenue for the government, expected to bring in £24.4bn in 2025-26 - translating to about £850 per household.

It comes after Rachel Reeves extended the fuel duty freeze at the last autumn Budget, allaying fears that motorists would have to pay higher taxes at the pump.

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At the time, Reeves said she would keep the freeze on fuel duty, which has been in place since 2011, as well as maintaining for another year the 5p cut brought in by the Conservatives in 2022.

It came despite fears she would seek to end the freeze to raise funds in the Budget, after she warned of a £22 billion 'black hole' in the public finances.

But the Chancellor said increasing fuel duty "would be the wrong choice for working people", especially in “difficult circumstances while the cost of living remains high”.

Freezing fuel duty and maintaining the 5p cut is estimated to cost £5 billion per year.

At the time, Reeves’ decision drew criticism from think tanks, but was applauded by motorists across the country.

The IFS’s director at the time, Paul Johnson, said: “Almost unbelievably this Government has followed the practice of its predecessor in freezing rates of fuel duties and not allowing the ‘temporary’ 5p cut to expire, while raising other taxes dramatically and claiming to be focused on tackling climate change,” after the announcement last year.

But Howard Cox of the FairFuelUK campaign said he was "delighted" at the news.

Rachel Reeves "seems to have finally recognised that keeping Fuel Duty frozen is at the core of a laudable journey to economic growth," he said after the announcement.

William Porter, policy and public affairs manager at road safety charity RoadSmart Policy, also welcomed the freeze at the last budget, saying: “We welcome the Chancellor’s decision to maintain the fuel duty cut, at least for now.

"Motorists have endured a torrid few years of high prices at the pumps and this decision will give them a much-needed boost.”

But the fiscal situation is different from the last budget, when inflation was only at 1.7%. That figure has just hit a near 18-month high in June to 3.6% as prices of daily essentials surged across Britain.

At the same time, the government has been ambiguous about its plans for the upcoming budget, with the Prime Minister recently telling MPs: “I am not going to write the Budget months out from the Budget.”

A Treasury source told the i Paper that the Government would not respond to tax speculation, saying: “We haven’t even set the date for the Budget.”