Rachel Reeves has decided to cancel a proposed increase in fuel duty this week in response to the impact of the Iran conflict on the cost of living. The Chancellor had previously announced plans to gradually eliminate the temporary 5p fuel duty cut starting in September, which was initially implemented in 2022 following Russia’s invasion of Ukraine.
Due to escalating fuel prices caused by the closure of the critical Strait of Hormuz, Reeves is expected to postpone the fuel duty hike. She will unveil this decision on Thursday along with a package of measures aimed at supporting families and businesses, according to sources at the Mirror.
This move follows reports that Downing Street and the Treasury were formulating strategies to address the cost of living challenges in the aftermath of Labour’s poor performance in the local elections. While the Prime Minister’s spokesperson declined to discuss specific tax plans, they emphasized the government’s commitment to easing financial burdens on motorists impacted by the Iran conflict.
The Chancellor has faced mounting pressure to abandon the fuel duty increase as the economic repercussions of the Middle East turmoil have led to higher inflation, food costs, and petrol prices for British citizens. Additional initiatives to assist low-income households with soaring energy bills are anticipated later in the year, pending further assessment of price fluctuations.
Ofgem is set to announce an updated price cap effective from July 1 on May 27, reflecting increased wholesale costs due to the Iran war. Industry analysts from Cornwall Insight project that the cap, affecting approximately 33 million customers on standard variable tariffs, will surge from around £1,641 annually to about £1,843 starting July 1.
To alleviate the surging costs of heating oil, particularly affecting families in rural regions like Northern Ireland, the government has earmarked £50 million for subsidies.