Labour has abandoned plans to raise fuel duty in September, in a swift policy reversal driven by mounting pressure from motorists and renewed volatility in global energy markets.
The decision means the long-running 5p-per-litre fuel duty freeze will be extended into 2027, a move likely to be welcomed by drivers already facing sustained pressure at the pumps following recent spikes in oil prices linked to instability in the Middle East.
The Treasury had previously signalled in the Autumn Budget that the temporary freeze would be wound down, opening the door to a return to inflation-linked increases after more than a decade of repeated extensions. That approach has now been dropped.
Instead, the Government said it would continue to shield households and businesses from higher transport costs, arguing that global energy shocks risk feeding directly into domestic inflation.
Prime Minister Keir Starmer said the move was designed to “back drivers” and protect working households from international price swings, adding that fuel costs remain a “direct transmission channel” from global instability into the UK economy.
Starmer said: “I can announce that we are backing drivers by extending fuel duty for the rest of the year. This is possible because of the decisions taken by the Chancellor, making us the fastest-growing economy in the G7.
“I know many are feeling the pressure of energy and fuel costs, and are worried about how the conflict in Iran will affect their finances. Because when global events drive up prices, it’s working people who feel it first.
“That’s why this Government is stepping in to keep fuel costs down for millions of drivers and putting money back in the pockets of working people.”
Chancellor Rachel Reeves said the decision reflected both economic conditions and political reality, stressing that recent turbulence in energy markets had left little room for planned tax increases on fuel.
Reeves said: “I’m keeping taxes down for drivers and businesses, putting money in the pockets of millions of workers and cutting costs for farmers and hauliers.
The war in Iran is pushing up fuel prices here at home, but after strong growth at the beginning of the year, I am stepping in to protect people at the pump. By protecting households and businesses, we are building a stronger and more secure economy for Britain. That is the right economic plan.”
Conservative leader Kemi Badenoch told MPs in the Commons: “I welcome some of what the Prime Minister has said on fuel duty. Yes, it’s still a freeze, but we asked him about this on the 11th of March and the 25th of March, and he said he wasn’t going to do it.
“So, thank you for the U-turn. Thank you for the U-turn. Labour MPs are shaking their heads. It would make more sense if they just did what we were doing, because they get there in the end anyway.”
The extension is expected to save the average motorist around £120 over the coming year, according to Treasury estimates, with fuel duty on petrol and diesel remaining at its lowest real-terms level in more than 16 years.
Alongside the freeze, ministers announced a targeted package of relief for logistics and agricultural sectors, including a 12-month road tax measure for hauliers and a temporary reduction in red diesel costs for certain users.
Officials said the changes would help reduce pressure on supply chains at a time when businesses are still contending with elevated input costs and higher energy prices compared with pre-crisis levels.
However, the fiscal cost of the policy shift is expected to reignite scrutiny over how the Government intends to balance pre-election tax commitments with ongoing spending pressures.
With inflation still sensitive to energy movements, analysts warned that any sustained rise in global oil prices could leave ministers exposed to further reactive policy decisions in the months ahead.
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