Fuel price rises planned for April will be staggered over the coming year to "ease the pressure" of rising inflation, the Chancellor said yesterday.

But motoring groups are not impressed, claiming petrol prices are still on course to hit record highs of £1.20 per litre early next month, not helped by the Chancellor's withdrawal of subsidies for biofuel production.

Under plans set out in last year's Budget, fuel duty was set to rise by up to 3p next month. Instead, they will go up by just 1p in April, by 1p in October, and by the remainder in January, Alistair Darling said yesterday. "This staging will ease the pressure on businesses and family incomes at a time when other prices are increasing," he said.

Under the schedule announced in the 2008 Budget, fuel duty is to rise by inflation plus 1p for three years, starting next month. The re-introduction of the fuel tax "escalator" was deeply unpopular with drivers, even more so because taxes have already moved inexorably upwards in the past 18 months. Next month's newly-reduced rise will be the fifth since December 2008.

Even with a reduction in the increase from 1 April, petrol prices are still expected to hit a new record next month. Drivers are already paying more than 117p per litre, pushing dangerously close to the 119.7p high at the height of the commodities bubble in July 2008.

The Government's withdrawal of the biofuel subsidy – which pays producers 20p per litre – will add 1p to pump prices from next month, according to AA estimates. Added to the 1p duty increase and the relevant VAT, prices will reach £1.20 per litre either on or shortly after 1 April, the organisation says.

"The changes announced in the Budget are not going to have drivers jumping for joy," Luke Bosdet, a spokesman for the AA, said.

"There is still a steady drip, drip, drip of more fuel tax siphoning off the family budget and undermining consumer spending."

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