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Sir Keir Starmer has announced he will keep “under review” government plans to raise fuel duty in September for the first time in 15 years, as prices at the pump start creeping up in response to the crisis in the Middle East.
Kemi Badenoch, Conservative leader, claimed that the prime minister was heading towards “another humiliating U-turn” and would reverse plans to phase in a 5p a litre increase in fuel duty over six months from September.
Starmer’s comments confirmed that ministers recognise they could be forced to spend billions of pounds supporting households and businesses through an energy crisis, but they are reserving their position for now.
Badenoch, speaking in the Commons, said: “Why does the prime minister think that now is the right time to increase the cost of petrol?”
The prime minister responded: “Fuel duty is frozen. It’s going to remain frozen until September, and we will keep the situation under review in light of what’s happening in Iran.”
Starmer and chancellor Rachel Reeves do not want to commit to any state subsidies for energy bills while the situation in the Middle East is so volatile and they have some political breathing space.
The plan to end the fuel duty freeze, in place since 2011, will not start to take effect until September, while domestic gas and electricity bills are subject to an Ofgem price cap until the end of June.
Reeves has said it is “much too soon” to speculate on whether the government could change its approach to fuel taxation as she was questioned about planned increases in fuel duty.
“Governments always keep all taxes under review,” Reeves told the Treasury select committee as she was asked about a planned rise in fuel duty starting in September.
“But it is much too early, when those changes are not due until September, to guess where petrol prices will be then,” Reeves said.
The Office for Budget Responsibility said last November that if the fuel duty rate were to remain unchanged at its current level throughout the forecast period it would reduce receipts, on average, by £3.6bn a year between 2027-28 and 2030-31.
For now, Starmer and Reeves are concentrating their efforts on tackling what they claim is “price gouging” by unscrupulous energy companies and petrol retailers taking advantage of wildly fluctuating market prices.