Reeves Poised to Cancel Fuel Duty Rise to Ease Cost of Living

Rachel Reeves is planning to cancel a planned fuel duty increase this week as part of a package of measures aimed at reducing the cost of living, government sources said.

The chancellor will announce she will not proceed with the 1p rise scheduled for September, and she may also cancel the entire 5p increase that was due to be phased in over the subsequent six months.

The move is designed to mitigate a rise in inflation stemming from the conflict in Iran. Reeves is expected to outline the plan to the House of Commons on Thursday.

The prime minister’s spokesperson declined to comment on the plans, first reported by the Sun on Sunday. However, he said: “The government is determined to keep costs down for motorists paying more because of the war in Iran. That’s why we’ve extended the 5p fuel duty cut twice, until September. While the chancellor will continue to monitor the situation, as the chancellor has set out, a rapid de-escalation in the Middle East remains the best way to keep pump prices low.”

The Treasury declined to comment.

Reeves announced at her last budget that she would freeze fuel duty for nine months but would end a temporary 5p cut first introduced by Rishi Sunak in 2022 following Russia’s invasion of Ukraine, starting this September.

In recent months, she has faced pressure to extend the temporary 5p cut, which costs the government an estimated £2.4bn annually. Last month, Richard Walker, executive chair of supermarket chain Iceland and the government’s cost of living champion, said on BBC Radio 4’s Today programme: “The 5p fuel duty cut that you allude to is an interesting one. That’s going to expire in September. I think, given where we are, we do need to be thinking and talking about extending it or enlarging it.”

Reeves has been exploring various other options to keep prices low, including freezing private sector rents and subsidizing energy bills for some people. However, officials said a rent freeze has been ruled out, and Reeves is expected to wait until later this year to announce an energy bill relief package because the price cap level is fixed until the end of June.

Government sources said that because energy usage is significantly lower in winter, the chancellor wants to wait until later in the year before deciding how much to spend on bill subsidies. She has already allocated £50m to subsidize heating oil for families who use it, many in rural areas and particularly in Northern Ireland.

Reeves will make her announcement amid significant uncertainty for the government, as Greater Manchester mayor Andy Burnham seeks to contest the Makerfield byelection on a platform challenging Keir Starmer for the Labour leadership.

Burnham has made affordability central to his pitch to Makerfield voters, telling an event in Manchester on Monday: “Forty years of neoliberalism … created an economy that didn’t work for most working people. It led to people paying over the odds for the daily basics – energy, housing, water, transport.”