Rachel Reeves was today under mounting pressure not to hike Fuel Duty in next week’s Budget as average pump prices hit an eight-month high.
And analysis by the AA found scrapping the 5p a litre relief on the levy would send prices surging to their highest since 2012, when non-comparable years are excluded.
The Chancellor is considering a multi-billion pound raid on drivers as she scrambles to fill the black hole in the public finances and after she was forced to abandon plans to hike income tax.
But today’s AA study found average pump prices are now 136.2p a litre for petrol and 144.6p a litre for diesel – the highest since March.
If Ms Reeves scrapped the 5p relief this would surge to 142.2p and 150.6p respectively when the 1p extra in VAT this would attract is included, as retailers would almost certainly pass on the increase.
The last time they were this high, when the ‘outlier’ years affected by the Covid-19 pandemic and Ukraine war are excluded, was in April 2012. At this point, they were 142.5p a litre and 147.9p respectively.
The 5p relief was introduced by then-Chancellor Rishi Sunak in 2022 amid soaring global oil prices caused by the pandemic and Ukraine war, when pump prices hit nearly £2 a litre. It has remained in place since, saving drivers billions, and is due to expire in April 2026.
Chancellor Rachel Reeves is considering hiking Fuel Duty in next week’s Budget, which would collectively cost drivers £2billion or more
The cost of filling up could reach a 13-year high, if non-comparable years involving the Covid-19 pandemic and Ukraine war are excluded, if Chancellor Rachel Reeves scraps the 5p a litre relief on Fuel Duty
Ditching it in next week’s Budget would net Ms Reeves between £2billion and £3billion a year.
She could also use the Fuel Duty Escalator, under which the levy is supposed to rise in line with inflation each year, although this is thought to be less likely.
The Escalator has remained frozen for more than a decade, meaning that, with the 5p relief, the levy is currently 52.95p a litre – accounting for around 40 per cent of the cost of a fill-up.
Any move to hike Fuel Duty would spark fresh accusations that Labour is declaring war on motorists and balancing the books off the backs of drivers, as the Chancellor already looks set to introduce a new pay per mile ‘stealth’ tax for electric vehicles.
The AA’s Jack Cousens said: ‘The recent increase in pump prices has put the national averages for petrol and diesel on a knife-edge that could see them return to the record levels of pre-Covid if the 5p Fuel Duty cut, introduced in March 2022, is cancelled in this month’s Budget.’
AA President Edmund King added: ‘Hiking UK fuel duty, with global turmoil threatening oil prices at every turn, could be disastrous for the UK economy and drivers dependent on road travel.
‘The danger of ramping up motoring costs further is that it hammers working people, adds costs to deliveries and businesses — and ultimately fuels inflation.
‘The Budget should not be an excuse for rampant cash-guzzling from motorists.’
The RAC’s fuel guru, Simon Williams, said: ‘Our latest research shows the cost of simply keeping vehicles on the road has become the most significant financial challenge facing drivers.
‘Driving is a must for so many people, yet the costs are running ever higher. We urge the Government not to hit drivers in the pocket at the Budget.’