Rumoured 7p fuel tax hike to send petrol and diesel prices soaring

Fuel duty will rise by a whopping 7p a litre in Labour’s Autumn Budget, it has been reported, adding nearly £4 to the cost of every fill-up and breaking the party’s pre-election promise.

The Daily Mail claims ‘Whitehall sources’ have confirmed that Chancellor Rachel Reeves will reverse Rishi Sunak’s 5p a litre fuel duty cut introduced in 2022, with an additional inflationary rise under consideration of 1 or 2p. 

When VAT is added on top, that would mean drivers paying an extra £3.85 per tank, and with the average car needing to be refuelled every eight days, such a rise would mean Labour hits drivers – most of whom are the ‘working people’ it promised to protect from tax rises before the election – with an annual average tax hike of around £175.  

The Daily Mail also reports that Reeves and the Government are considering reintroducing annual inflation-based increases to the rate of fuel duty, sparking fears of a return to the deeply unpopular ‘fuel price escalator’. That was the mechanism designed to increase prices annually beyond inflation, which helped seal the last Labour Government’s reputation as ‘anti-car and anti-driver’. 

Earlier this week, Auto Express wrote to the Chancellor pointing out the unfairness of tightening the screws on hard-pressed drivers, just as fuel prices have started to ease on the global market. However, the Mail report suggests Government ministers believe that it’s precisely because pump prices are at their lowest since the Russian invasion of Ukraine that they can get away with pocketing more cash from the price of every litre – notwithstanding the cost of living pressures still impacting drivers and their households. 

According to the Tax Foundation, the UK already taxes diesel harder than any other country in Europe, while we rank eighth for the duty already levied on petrol – the government currently takes 63p a litre from the pump price charged on both.

With the transition to electric cars threatening a major loss of government income in coming years, the prospect of ‘pay per mile’ taxation to replace fuel duty altogether could still be on the table. The matter was raised in a House of Lords debate earlier this week, when Labour peer Baroness Blake said “she couldn’t comment on any matter that might be raised in the Budget”.