Drivers have received a significant boost as the Labour government cancels the inflationary increase in fuel duty for 2026-27. The price of oil climbed back above $100 per barrel on Wednesday, after spending 10 days below that threshold, the RAC has warned.
Government Action on Fuel Duty
Gregory Stafford, Conservative MP for Farnham and Bordon, questioned the Chancellor in the Commons, asking whether she is taking steps to reduce fuel duty and whether she has considered halving it to help lower the cost of living.
Dan Tomlinson, MP for Chipping Barnet and a Treasury minister, replied on behalf of Chancellor Rachel Reeves: "The Government has already taken action on fuel affordability at the pump. At Budget 2025, the Government extended the 5p-per-litre cut for a further five months, until the end of August this year."
"The Government has also cancelled the increase in line with inflation for 2026/27. Instead, rates will only gradually return to early 2022 levels by March 2027. Since Autumn Budget 2024, the Government's decisions to freeze fuel duty will save the average motorist over £90."
Revenue and Impact
Fuel duty raises approximately £24 billion each year, which helps fund vital public services and infrastructure across the UK. The government keeps fuel duty under review, as with all taxes.
The Office for National Statistics (ONS) reported that retail sales volumes rose by 0.7% last month, significantly above analysts' forecasts of just 0.1%. This increase was driven by a 6.1% rise in fuel sales volumes, triggered by the biggest jump in fuel prices for more than three years, due to the conflict in the Middle East.
The value of fuel sales rose by 11.6% amid the surge in petrol and diesel prices, marking the largest monthly increase since November 2021.
Susannah Streeter, chief investment strategist at Wealth Club, commented: "There was panic at the pumps in March, as escalating prices saw motorists race to fill up their tanks to try to save cash and build reserves in case of shortages. A surge in purchases on forecourts was the biggest driver behind the uplift in monthly retail sales."
