The planned rise in fuel duty will be frozen until early next year, George Osborne announced yesterday in the latest Government U-turn.
Petrol was due to go up by 3p a litre in August and the Transport Secretary, Justine Greening, suggested at the weekend that the rise would go ahead. But in a move underlining how concerned ministers are about the squeeze on living costs, the Chancellor told the Commons the rise would be delayed until January.
Mr Osborne said the £550m cost of the freeze would be paid for by larger-than-expected savings made by Government departments. Treasury officials insisted the move had been had been in the offing "for a number of weeks" and was discussed by David Cameron, Mr Osborne, Nick Clegg and Danny Alexander a month ago.
If fuel duty had been increased in August as planned in the Budget, it was estimated that the Government would have raised £1.5bn. However, the timing of the move will be seen as a victory for Labour MPs who tabled an amendment to the Finance Bill, due to be discussed next week, seeking a freeze in duty. Yesterday, the Shadow Chancellor, Ed Balls, pictured, wrote an article in the Sun calling for the freeze.
Mr Osborne said the postponement would be good for growth. "This means fuel duty will be 10p a litre lower than planned by the last Labour Government," he said. "We are on the side of working families and businesses, and this will fuel our recovery at this very difficult economic time for the world. The one-off cost of this change will be fully paid for by the larger than forecast savings in departmental budgets."
The move – following U-turns on charity, pasty and caravan taxes – shows concern about the electoral backlash against policies that adversely affect the cost of living.
Downing Street has told ministers it wants to know about any decisions that could affect household spending, to ensure that the Government "does nothing" to make people worse off.
Mr Balls said: "This is the fastest U-turn in history. With U-turns on petrol, pasties, caravans, charities and churches, George Osborne's Budget is now in tatters – a truly omnishambles of a Budget from a part-time Chancellor whose reputation is now badly damaged."
The Conservative MP Robert Halfon, who led the Commons campaign for a fuel duty freeze, said the move would help economic growth.
Edmund King, the president of the AA, said: "Motorists will breathe an enormous sigh of relief with summer holidays about to take off."
Professor Stephen Glaister, director of the RAC Foundation motoring group, said: "This is good news for drivers and for the country."
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