Another Budget U-turn as George Osborne announces 3p fuel duty rise is to be axed

Fuel duty is to be frozen for the rest of this year George Osborne announced this afternoon – in yet another budget U-turn.

Petrol prices were due to go up by 3 pence in August and just this weekend the Transport Secretary Justine Greening insisted that the rise would go ahead.

But in a move underlining just how worried the Government is about pressures on the cost of living the Chancellor announced in the Commons that the rise would now be delayed until next year.

Mr Osborne said the £500 cost of the freeze would be paid for by larger than expected savings made by Government departments.

However the move will be seen as a victory for Labour who tabled an amendment to the Finance Bill, due to be discussed next week, calling for the fuel duty freeze.

This morning Ed Balls, the Shadow Chancellor, wrote an article in The Sun calling on the Government to freeze the duty.

Announcing the move in Treasury questions Mr Osborne said the freeze would be good for economic growth.

“This means that 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 and we will set out details of those as usual in the autumn statement.”

But the move – following u-turns on charity and pasty taxes – shows just how concerned the Government is about the electoral backlash on moves that affect the cost of living.

Downing Street has instructed ministers to inform them of any policies that could effect household spending in an attempt to ensure that the Government does nothing to make people worse off.