Reeves poised to cancel planned fuel duty rise to help with cost of living | Fuel duty
Rachel Reeves plans to cancel the increase in fuel tax by announcing a package of measures to reduce the cost of living this week.
Government sources said the Chancellor will announce that he will not increase the tax by 1p as in September and could cancel the entire 5p increase, which is due to be phased in over the next six months.
The move is part of a broader plan to ease the rise in inflation caused by the war in Iran. Reeves is expected to announce the plan to the House of Commons on Thursday.
A spokesman for the Prime Minister’s Office declined to comment on the plans. first reported Next to the Sun on Sunday. But he said: “The government is determined to keep costs low for drivers who are paying more due to the war in Iran. That’s why we’ve extended the 5p fuel duty cut twice until September. While the Chancellor will continue to monitor the situation as he announced, a rapid de-escalation in the Middle East remains the best way to keep prices at the pump low.”
Treasury declined to comment.
In his latest budget, Reeves announced he would freeze fuel duty for nine months but end the temporary 5p cut first announced by Rishi Sunak in 2022 following Russia’s invasion of Ukraine from this September.
In recent months it has come under pressure to extend the temporary 5p cut, which is estimated to cost the government £2.4bn a year. Last month Richard Walker, chief executive of the Icelandic supermarket chain and the government’s cost-of-living champion, told BBC Radio 4’s Today programme: “The 5p fuel tax cut that you’re talking about is interesting. It’s due to end in September. I think, given the situation we’re in, we need to think and talk about extending or expanding that.”
Reeves has been looking at a range of other options to keep prices down in recent weeks, including freezing private sector rents and subsidizing some people’s energy bills. But while officials say a rent freeze is unlikely, they say Reeves is expected to wait until later in the year to announce the energy bill reduction package, given that the price cap is fixed until the end of June.
Government sources say the Chancellor wants to wait until later in the year before deciding how much to spend to support the bills, as energy use is much lower in winter. he already £50 million allocated To subsidize the cost of heating oil for families who use the fuel to heat their homes, many of whom are in rural areas, particularly in Northern Ireland.
Reeves will make his announcement at a time of great uncertainty for the government, with Greater Manchester mayor Andy Burnham trying to fight the Makerfield by-election with promises to challenge Keir Starmer for the Labor leadership.
At an event in Manchester on Monday, Burnham put affordability at the heart of his likely bid to Makerfield voters: “Forty years of neoliberalism… have created an economy that is useless for most workers. This has led to people overpaying for everyday basic needs – energy, housing, water, transport.”
