Keir Starmer’s advocate for addressing the rising cost of living has suggested that the government should contemplate extending or potentially raising the current 5p fuel duty reduction in light of escalating tensions in the Middle East.
The input from Iceland’s chief, Lord Richard Walker, increases the urgency on government officials to take action as pump prices surge amid the ongoing crisis in the Middle East.
Chancellor Rachel Reeves had previously prolonged the 5p per liter fuel duty cut, initially introduced following Russia’s invasion of Ukraine in 2022, until August 2026 during last year’s Budget announcement. However, this cut is set to expire in September and will gradually phase out by March 2027.
Speaking on BBC Radio 4’s Today program, Lord Walker emphasized the importance of considering an extension or expansion of the current 5p fuel duty reduction given the current circumstances. He also highlighted the recent 14p per liter fuel tax cut implemented by the Australian government, underscoring the significance of such measures.
The discussion was further fueled by remarks from Tory peer Lord Simon Wolfson, who emphasized the need for the Treasury to avoid profiting from the situation in Iran and potentially adjust fuel duty to alleviate immediate financial burdens on businesses and consumers.
The government is closely monitoring the situation in light of the escalating conflict involving the US, Israel, and Tehran, as well as the potential disruption of the oil supply route through the Strait of Hormuz. Rachel Reeves reassured that preparations are underway to address all possible outcomes and ensure a stable supply of oil and gas to mitigate price increases.
Addressing concerns about a possible tax windfall due to rising pump prices, Ms. Reeves dismissed the notion as unrealistic, emphasizing the government’s commitment to supporting the public amidst financial challenges. Reports have indicated a significant increase in daily tax revenue linked to oil and gas prices, but concerns persist regarding the escalating costs of government borrowing.
A spokesperson from the Treasury affirmed the government’s focus on implementing a sound economic strategy to navigate the volatile global landscape and support working individuals. They highlighted the freeze on fuel duty until September, along with targeted assistance for those facing higher heating oil costs and measures to prevent unfair price hikes and reduce food expenses for consumers.