Senior government ministers are urging Chancellor of the Exchequer John Healey to abandon plans to increase fuel duty by up to 7p per litre in early 2024, amid growing concerns over the impact of rising diesel prices on the economy and household budgets. The proposed hikes, set to be introduced in phases from January, have drawn criticism as fuel prices reach record highs, fueled in part by supply disruptions linked to ongoing conflicts in the Middle East.
Diesel prices recently hit an all-time peak of £1.99 per litre, according to the RAC, with fears that prices could rise as high as £3 per litre if former U.S. President Donald Trump moves to halt diesel exports to the UK as part of efforts to reduce domestic costs in the United States. Against this backdrop, senior ministers have expressed strong reservations about implementing the planned removal of a temporary 5p per litre cut in fuel duty, which was first introduced by the Conservative government in 2022.
One minister warned that proceeding with the fuel duty increase would be politically untenable, arguing that the government could not claim to support households facing the cost-of-living crisis while allowing such a rise to go ahead. The official called on Chancellor Healey to find alternative budget resources and indefinitely postpone the increase.
Another Cabinet insider emphasized the broader economic implications, noting that diesel underpins much of the UK's supply chains—not only for commuters but also for goods transport and supermarket deliveries. The source indicated widespread understanding across government that raising fuel duties now would exacerbate pressures on consumers and businesses alike.
Under current Treasury plans, fuel duty will increase by 3p per litre on January 1, followed by a further 2p increase on March 1. Additionally, the government intends to end a 16-year freeze on fuel duty with a 1p rise in April. Value-added tax (VAT) will also add approximately 1.2p per litre, bringing the total potential increase to about 7.2p per litre. For an average family car, this could translate to nearly £4 extra to fill the tank.
Treasury officials have indicated that no final decision has been made regarding the fuel duty rises. However, retaining the current 5p per litre reduction would cost the government roughly £2.4 billion annually, complicating efforts to maintain fiscal balance amid other economic challenges. Chancellor Healey faces pressure to weigh these competing priorities as he prepares the budget for 2024.