The Liberal Democrats have called on the government to cut fuel duty by 10p a litre as soaring oil prices push diesel towards £2 a litre and threaten to deepen pressure on motorists and household finances.
The intervention by Sir Ed Davey comes as the continuing US-Iran conflict drives up global oil prices, with the increase feeding through to petrol stations across Britain.
Fresh figures from RAC Fuel Watch suggest diesel could reach its highest price on record at about £2 a litre, surpassing the previous peak recorded after Russia’s invasion of Ukraine.
Average petrol prices have risen to 172.02p a litre, while diesel stands at about 195.32p. Both are more than 37 per cent higher than at the start of the US-Iran war and have reached their highest levels since August 2022.
The RAC’s head of policy has warned that diesel prices could “reach a new all-time high” this week.
Davey has urged Chancellor John Healey to introduce a temporary 10p-a-litre cut in fuel duty until Christmas, while also abandoning a planned increase in the tax scheduled for January 2027.
Speaking on BBC’s Sunday with Laura Kuenssberg, Davey said the proposed reduction would result in a 12p fall in the price paid by motorists once its effect on VAT was included.
He added: “Petrol and diesel prices are higher than they’ve been for a long time because of Trump’s mad war with Iran, and people need help now.
The Liberal Democrat leader said the three-month measure would cost about £2bn but could be financed through higher government revenues generated elsewhere by elevated energy prices.
If you look at the extra money the Government will get through the energy profits levy, from gas taxes, from VAT and fuel duty, it’s self-funding,” the Lib Dem leader added.
The party is also pressing the government to abandon the planned increase in fuel duty next year.
Sir Keir Starmer announced earlier this year that a 5p fuel duty freeze would be extended, with the measure then gradually phased out in September, December and March 2027. The timetable was subsequently amended in response to elevated prices, although a 3p increase remains scheduled for January.
The renewed focus on fuel duty comes ahead of Healey’s first Budget on Wednesday October 28, which will also be the first fiscal statement under Prime Minister Andy Burnham.
Davey said he would use his party conference speech on Tuesday to outline a “credible growth plan” that would include further tax reductions.
The proposals are expected to include cutting the bus fare cap from £3 to £1 and reducing rail fares by 10 per cent.
The government has said the Budget will “move power and money out of Westminster, and into every postcode around Britain” and will be “built on fiscal discipline” to provide greater stability for households and businesses.
But continued increases in pump prices could make fuel duty a more prominent issue in the Budget, particularly if diesel breaks the £2-a-litre threshold.
Petrol remains further from its previous record of £1.91 a litre, meaning it could take longer to reach a new peak.
For motorists, however, the immediate pressure is already being reflected in higher weekly fuel bills, as the rise in global oil prices feeds through into domestic transport costs and broader household spending.
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