The Chancellor is ready to call a halt to the steep rises in petrol duties when the local authorities win the power to impose "congestion charges" on motorists who drive into town and city centres.
John Prescott, the Deputy Prime Minister, will use a Transport Bill in the Queen's Speech in November to fight back against critics who claim that Tony Blair has got cold feet because he fears the Government will lose votes if it is seen as "anti-car".
Senior ministerial sources said yesterday the congestion charges would enable the Government to meet international agreements to cut greenhouse gases without the added burden on petrol duties.
Councils may be able to bring in congestion charges, and a levy on workplace parking, by 2001. Under the Bill, the money will be earmarked for improving public transport.
The controversial "fuel duty escalator" was inherited from the Tories. Some Labour ministers believe it hits country motorists harder, because they have no alternative to using private cars, travel further, and have lower earnings.
Treasury officials have advised Mr Brown it is hard to justify a six per cent real terms rise in duties at a time of low inflation, with the Government set to reach its 2.5 per cent target.
Mr Brown was surprised by the angry reaction from the haulage industry when his March Budget confirmed the big increases. "It had not been an issue before," said one ministerial source.
The Chancellor will not back down over this year's rises, but signals from the Treasury suggest that he is ready to hold down future increases. This would boost Labour's appeal to voters living in the countryside at the next election.
Yesterday Mr Prescott insisted there would be no turning back from his "radical" policies on transport, telling BBC2's On the Record that rowing back was "not my style".
This week Mr Prescott will introduce a bill to set up a Strategic Rail Authority, which will bring in quicker, retrospective fines for operators who breach their franchise conditions and will order Railtrack to improve the network.
Mr Prescott admitted that he could not "force" motorists out of their cars but insisted that they would want to use public transport if it could be improved. "To do nothing is not an option," he said. "We cannot build our way out of this problem as the past 20 years have shown. The environmental damage from the exhaust gas emissions poisoning our city centres and even increasing the pollution in the cars means that it is an anti-motorist policy to do nothing."Reuse content