Rachel Reeves has confirmed that the 5p cut on fuel duty will be extended to the end of the year, instead of being phased out in September as previously planned. However, fuel duty rates are set to rise by 3p per litre at the start of January next year, the Labour Party government has admitted.
Fuel Duty Rates to Increase
At present, the rate of fuel duty on unleaded petrol is 52.95p per litre. This will rise by 3p per litre on January 1, 2027, to 55.95p. Rates will rise even further just months after, increasing to 57.95p per litre from March 1, 2027, returning costs to levels last seen prior to March 23, 2022.
Political Reaction
In response to what has been described as a stealth hike, Conservative Party Shadow Transport Secretary Richard Holden labelled the move a U-turn on a U-turn. He told the Daily Mail: We are clear: Labour should abandon their tax raid on drivers in the middle of an energy crisis.
The government said the extension of the fuel duty freeze could save the average driver £120 since 2025 by the end of the year, equivalent to £60 a year. This was echoed by AA President Edmund King, who described the 3p hike in January as an unwelcome New Year present.
RAC head of policy Simon Williams said questions remained over what would happen next year. 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? he said.
Responding to the announcement, Conservative Party leader Kemi Badenoch thanked Keir Starmer for the government's U-turn on fuel duty, which she said her party had called for in March. Sir Mel Stride, the Tories' shadow chancellor, claimed the government had been forced into a U-turn on fuel duty following pressure from Conservatives.
Labour's fuel tax hike would have hurt businesses and hammered hardworking families already stretched to breaking point. Under the Conservatives, fuel duty was frozen or cut for 14 years in a row.
