42 million drivers to feel huge benefit of petrol and diesel decision by Reeves | Personal Finance | Finance

Chancellor Rachel Reeves is expected to freeze fuel duty again this autumn to help drivers who are struggling with the current cost of living. Campaigners have called on her to stop the freeze to fill a gap in public finances. The fuel duty freeze has been in place since 2011. The 5p cut was brought in by Rishi Sunak, who was the chancellor in 2022, and is estimated to cost £5 billion per year.

It was previously reported that the Government were expected to stop the freeze, which would see drivers face higher fuel prices. But, Rachel Reeves reportedly believes hiking the tax would be the “wrong” choice for working people in the UK in the face of current living costs. The current headline rate on standard petrol and diesel is 52.95 pence per litre, which would usually rise with inflation year on year. The freeze means that in real terms, the rate has fallen by one-third since it was first introduced by George Osborne.

Paul Johnson, former IFS’s director, told the iPaper that it was “almost unbelievable” that the Government would freeze fuel duties while “raising other taxes dramatically and claiming to be focused on tackling climate change”.

Meanwhile, the Social Market Foundation criticised the decision expected to be announced in Reeves’s budget, calling it a “regressive” policy that only benefits the wealthiest in our society.

They claim that the freeze will cost the government more than £200bn by 2028, which exceeds the total budget for the NHS.

After deciding to keep the freeze last October, Reeves said: “To retain the 5p cut and to freeze fuel duty again would cost over £3 billion next year. At a time when the fiscal position is so difficult, I have to be frank with the House that this is a substantial commitment to make.

“I have concluded that in these difficult circumstances – while the cost of living remains high and with a backdrop of global uncertainty – increasing fuel duty next year would be the wrong choice for working people.

“It would mean fuel duty rising by 7p per litre. So, I have today decided to freeze fuel duty next year and I will maintain the existing 5p cut for another year, too.”

Fuel duties are a significant income source for the Government, expected to generate £24.4billion in 2025-26, which is around £850 per UK household.