UK Politics

Chancellor responds to pressure over fuel duty

UPDATE: The Treasury is making clear that the planned 3p fuel duty rise due in August has now been postponed until January 2013. Postponing planned rises is the way that the duty has been frozen under this government and the last one.

Ministers have taken the decision even though oil prices are currently falling worldwide. The price of crude oil has been falling steadily since March/April. The most recent peak was at above $125 a barrel for Brent crude, the leading benchmark. Falling demand, with a weakening global economy, has now seen that drop to today's $92 a barrel.

At the pump, unleaded had been above 142p a litre. Yesterday the average price of unleaded petrol was 132p a litre. This week Asda and Tesco have both been cutting prices, with Asda promising not to charge more than 127.7p a litre.

The Treasury points out, however, that pump prices are still mainly above the level at the time of the Budget of 2011, when the chancellor took the decision to scrap the so-called fuel duty escalator which produced automatic above inflation duty rises.

The cost of the latest decision is £500m and the Treasury claims that it will be paid for by higher-than-expected departmental savings.

The government was facing a vote in the Commons on fuel duty in which it would have been opposed by Labour and some Tory backbenchers. Half a dozen Conservative MPs had signed an Early Day Motion calling for a duty freeze. This morning the shadow chancellor called for the duty to be frozen in an article in The Sun and on Radio 4's Today programme.

In the last few moments Ed Balls welcomed what he described as another U-turn to join those on pasties, churches, caravans and skips.

Only a few days ago the Transport Secretary Justine Greening said that she would not be calling for a freeze in duty.

15:21: The Chancellor of the Exchequer has just announced in the Commons that he will not proceed with the planned 3p increase in fuel duty this August.

In his Autumn Statement George Osborne postponed a scheduled 3p rise in fuel duty for January but said that the planned rise this Summer would proceed - even though it would be cut from 5p to 3p.

He has now responded to pressure from some Tory backbenchers and The Sun newspaper who were joined by Labour today when Ed Balls called for the duty to be frozen.

This comes on a day when official figures showed people's standard of living dropping. Petrol is for many families the largest contributor to a squeeze on their incomes.