Budget 2023: Chancellor Jeremy Hunt extends fuel duty cut for further 12 months

The temporary fuel duty cut has been extended by another 12 months by Chancellor Jeremy Hunt

Hunt announced the move as part of his first Budget, confirming that a scheduled increase in duty would not take place and that the 5p per litre reduction will remain in place until March 2024.

Confirming the move, Hunt said: “Because inflation remain high, I have decided now is not the right time to uprate fuel duty with inflation or increase the duty. For a further 12 months I’m going to maintain the 5p cut and freeze fuel duty too. That saves the average driver £100 next year and around £200 since the 5p cut was introduced.”

The announcement means that the levy on petrol and diesel will remain at 52.95p per litre, following the temporary cut made by Rishi Sunak in last year’s Budget.

The decision to maintain the current rate means that fuel duty has not increased for the last 13 years and dispels worries that drivers could be hit with a 12p per litre increase at the pumps. The Office for Budget Responsibility (OBR) previously forecast that an end to the 5p per litre cut along with the scheduled increase in line with inflation would have seen the levy increase by 23% overnight.

The extension has been welcomed by motoring groups who previously warned that reverting to the 57.95p per litre levy would have punished struggling households already dealing with the soaring cost of living.

RAC head of roads policy Nicholas Lyes said: “We welcome the government’s decision to keep the 5p fuel duty cut in place for another 12 months. The cut has given drivers some much-needed relief in what has been the most torrid year ever at the pumps, with price records being broken even after duty was cut. Given the importance of driving for consumers and businesses, duty should be kept low to help fight inflation.”

Howard Cox of the FairFuelUK lobbying group commented: “This is a road user levy that hits the poor hardest and dictates economic growth, cost of living, and jobs. Today’s favourable fiscal announcement will be received very well by motorists, small businesses, low-income families, and truckers.”

Fuel duty was cut last year as drivers faced near-daily increases in fuel prices, driven by the war in Ukraine. Despite the levy cut, prices continued to spiral until July, reaching almost £2 per litre for diesel and £1.91 for petrol.

Since then prices have gradually fallen, although their decline has slowed, dropping most recently by 1p per litre for petrol and 3p for diesel. An average litre of petrol now costs 147p and diesel costs 166p. According to the RAC, this means diesel drivers are still overpaying as there is only a 6p per litre difference in wholesale prices for the two fuels.