Jeremy Hunt is poised to spend £5bn on freezing fuel duty as part of Wednesday’s Spring Budget, providing a major tax break for UK motorists.
Reports suggest the chancellor will extend a 5p per litre fuel duty cut on petrol and diesel, announced by Rishi Sunak in 2022, for a further year.
Hunt has repeatedly outlined his desire to bring down the tax burden, which is expected to rise to record levels regardless of any Budget announcements.
The fuel duty freeze would likely fall alongside a 2p reduction in national insurance, which the Treasury is looking to axe after deciding against cutting income tax.
It would cost the Treasury around £5bn but will not narrow space for other tax cuts as fuel duty has been frozen since 2011. That is in contrast to the stated government policy, which is that the levy should rise in line with inflation.
The decision comes after the average price of petrol and diesel rose by 4p and 5p a litre in February, the biggest increase in five months.
Unleaded is up to 144.76p, adding more than £2 to the price of a tank, while diesel has increased to 153.22p, according to analysis from motoring group the RAC.
Jon Dye, Head of Motor at insurer QBE Europe, said: “This Spring fuel duty decision will lower inflation, helping motorists at the pumps, and importantly provide support to businesses as they battle to reduce overheads whilst transitioning to Electric Vehicles to meet government green targets.
“February saw the highest fuel prices in five months and despite prices continuing to increase, this government decision will allow fleet operators across the UK to continue investing where it matters; in leading the transition to EVs and in securing UK supply chains.”
The Budget will be pivotal in the conservative party bid to win back voters from Labour ahead of the general election.
Tory backers are hoping Hunt focusses on tax cuts but high interest rates and government debt are proving significant headwinds.