Reeves to scrap planned fuel duty hikes amid Iran conflict inflation

Chancellor Rachel Reeves is preparing to announce the cancellation of a planned 1p increase in fuel duty, originally scheduled for September, alongside the potential abolition of a further 5p rise staged over the following six months. This policy shift aims to alleviate cost-of-living pressures exacerbated by inflation linked to the war in Iran. The decision follows sustained pressure from business leaders, including Richard Walker of Iceland, to extend or enlarge the existing temporary 5p cut, which costs the Treasury approximately £2.4bn annually.

The announcement is expected in the House of Commons on Thursday. While the prime minister’s spokesperson declined to comment on the specific plans, which were first reported by The Sun, he confirmed the government’s determination to keep costs down for motorists. He noted that the government had already extended the 5p fuel duty cut twice until September and that a rapid de-escalation in the Middle East remains the best way to keep pump prices low.

The temporary 5p fuel duty cut was first introduced by former Chancellor Rishi Sunak in 2022 following Russia’s invasion of Ukraine. At the last budget, Reeves announced a nine-month freeze on fuel duty but stated the temporary 5p cut would end in September. However, recent months have seen intensified calls to maintain the reduction. Richard Walker, executive chair of Iceland and the government’s cost of living champion, suggested on BBC Radio 4 that the cut should be extended or enlarged given the current economic climate.

In addition to fuel duty adjustments, the government has considered other measures to manage household expenses. Officials have ruled out a freeze on private sector rents, a measure Reeves had previously examined. Instead, she has allocated £50m to subsidise heating oil costs for families, particularly in rural areas and Northern Ireland. The chancellor is expected to wait until later in the year to announce further energy bill relief, as energy usage is typically lower in winter and the price cap remains fixed until the end of June.

The policy announcement comes against a backdrop of political uncertainty, with Greater Manchester mayor Andy Burnham contesting the Makerfield byelection. Burnham is campaigning on affordability and challenging the current economic approach, arguing that decades of neoliberalism have created an economy that fails working people. He has positioned himself to challenge Prime Minister Keir Starmer for the Labour leadership, using the cost of living crisis as a central theme in his bid.