Fuel Duty Cut Extended to End of Year
The government has announced that the 5p reduction on fuel duty will be extended until the end of the year, rather than being phased out in September as previously planned.
This reduced tax rate on petrol and diesel was initially introduced by the former Conservative government following Russia's full-scale invasion of Ukraine in 2022, which caused fuel prices to surge.
Impact of Middle East Conflict on Fuel Prices
Fuel prices have increased significantly since the onset of the US-Israel conflict in Iran, which has disrupted global supplies of oil and liquefied natural gas.
Prime Minister Keir Starmer addressed the House of Commons regarding the extension:
"We're backing drivers by extending the freeze on fuel duty,"
In response, Conservative leader Kemi Badenoch expressed gratitude for the government's reversal on fuel duty policy, noting that her party had advocated for this change since March.
Background and Previous Extensions
The 5p fuel duty cut was first introduced in the Spring Statement of March 2022 under the Conservative government and was intended to last for 12 months. However, it has been extended multiple times since then.
Starmer indicated that the decision to prolong the freeze was influenced by recent developments in the Middle East.
According to the RAC, the average price of petrol reached its highest point since the beginning of the Iran conflict on Monday, hitting 158.52p per litre.
Additional Measures for Agriculture and Haulage
Starmer also revealed plans to reduce the fuel duty rate on red diesel by more than one-third, lowering it to 6.48p per litre from mid-next month through the end of the year. This measure aims to support farmers who rely on red diesel for tractors and other agricultural machinery.
Furthermore, a 12-month exemption from vehicle excise duty for heavy goods vehicles (HGVs) was announced. The government stated this would alleviate increased supply chain costs impacting the haulage sector, which can subsequently affect consumer prices.
This exemption is expected to save hauliers approximately £600 for a typical heavy lorry.
Industry Reactions and Future Uncertainty
Simon Williams, head of policy at the RAC, commented on the announcement, emphasizing uncertainty about future fuel duty policy:
"Will drivers be hit with the full 5p in one go in the spring, will a new phasing be agreed, or will the government even abandon an increase altogether?"
