Senior members of the Cabinet have warned Alistair Darling that he must make an immediate pledge to freeze fuel duty to respond to public concern about spiralling petrol prices, The Independent has been told.
Several ministers led by John Hutton, the Business Secretary, have told the Chancellor that he must issue a statement before the Commons starts its summer break on 22 July that he will scrap the 2p-a-litre rise in fuel duty due to take effect in October.
Pressure on him to act now intensified as oil rose closer to the $150 a barrel mark yesterday, reaching $143.67, another new record high, on the New York Mercantile Exchange before slipping back slightly. Mr Darling is expected to continue the freeze until April next year but does not want to announce the move until September so he can take account of the latest news on oil prices.
It has already been shelved from this April, at a cost of £550m, because of the soaring oil prices. Mr Darling's aides admit that he has been lobbied by other ministers to act more swiftly but angrily rejected their calls last night, telling them to "get on with their own jobs".
The cabinet members are reflecting wider concerns in the Labour Party that the Government has been slow to respond to the impact of the economic downturn on people's everyday lives.
Mr Hutton is said to have passed on the strong views from British industry that the duty should be frozen for a second time and to have won the backing of other ministers for a swift announcement.
Another minister said: "We won't get any credit if we wait until the autumn. It's bad politics to wait. If we delay, everyone else will have demanded a freeze and it will look like we have been pushed into it grudgingly."
One of Mr Darling's allies countered: "It's not a sensible policy. People should think strategically. If we announce a freeze now, then there would be demands for another 2p cut in the autumn."
Demands by Labour backbenchers for some "good news" in the face of rocketing fuel and food prices will be increased by the by-election in Glasgow East. The Labour MP David Marshall confirmed yesterday that he is standing down for health reasons and the writ for a 24 July by-election will be moved today. Rising prices are bound to feature in the campaign.
Some Labour backbenchers believe that if the safe seat is lost to the Scottish National Party, Gordon Brown may reach a "tipping point" and face widespread demands to stand down. "The writing would be on the wall," one said last night.
Mr Darling will come under further pressure tomorrow from Labour MPs to make immediate concessions on two other issues – by fully compensating all the losers from the abolition of the 10p tax rate and scrapping plans to raise road tax by up to £250 a year for cars that are up to seven years old. Both issues will be debated when the Finance Bill implementing the Budget is debated in the Commons.
But Downing Street ruled out any further compensation over the 10p decision on top of the £2.7bn package announced in May and Treasury sources said no announcement on road tax was likely until the pre-Budget report in the autumn. Mr Darling's allies say these matters are on the table but point out that he is facing a difficult balancing act in a very tight financial year.
They denied that he had already decided to climb down on his plans to charge higher road tax for vehicles with higher carbon emissions but said he was listening to the concern of backbenchers. Some Labour MPs are expected to back a Conservative Party amendment tomorrow to the Finance Bill scrapping the retrospective nature of the road tax shake-up. The Tories say that people with family cars, as well as gas-guzzlers, will be affected and 51 Labour MPs have signed a Commons motion opposing the changes.
Justine Greening, a shadow Treasury minister, said: "Labour MPs who agree how unfair this is can vote their Government's vehicle excise duty proposal down on Wednesday without having to wait a year.
"We know Gordon Brown will back down on this eventually but hard-pressed families struggling with increased cost of living need to know where they stand right now."
Tory MPs will vote for an amendment, signed by 16 Labour MPs, calling for the 1.1 million people not covered by the 10p tax package to be compensated in full. The Prime Minister's official spokesman said: "We have set out our proposals for this year, which covered the losses of 80 per cent of those affected and halved the losses of the remaining 20 per cent. Those are the proposals for this year."
Baroness Prosser, a former Labour treasurer, urged Mr Brown to do more to tackle the party's severe financial problems. She told BBC Radio 4: "I think we need the Prime Minister himself to take this on his shoulders and say, 'This is a worse situation than we have been in ever and therefore as Prime Minister and leader of the party I need to get stuck in here'." Asked if a change of leader would bring back Labour's missing donors, she replied: "No, I don't think so. We have Gordon. He is well known to everybody. He is not exactly a sunbeam, but that is his style. He is very solid, very reliable, very committed to a good Labour agenda."
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