The government will not go ahead with a 3p-a-litre rise in fuel duty in August, Chancellor George Osborne has announced.
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The move follows a campaign by road users’ groups, who argued the change, announced in the Budget, would damage the economy.
Fuel duty will be frozen for the rest of the year, the chancellor told MPs.
Labour had threatened to force a House of Commons vote on the issue.
Mr Osborne said: “We are on the side of working families and businesses and this will fuel our recovery at this very difficult economic time for the world.”
The government was “doing everything we can in very, very difficult economic circumstances”, he added.
In last year’s Autumn Statement Mr Osborne cancelled a scheduled 3p rise in fuel duty for January this year but said another planned rise this August would proceed – although it would be cut from 5p to 3p.
BBC political editor Nick Robinson said the chancellor had responded to pressure from some Conservative MPs and The Sun newspaper – in which Labour’s Ed Balls had an article on the subject on Tuesday – who have called for the planned rise to be dropped.
Labour had called for the increase to be delayed until next January, saying the cost between £500m and £600m could be covered by the underspend on the Olympics budget or by closing tax loopholes and reversing changes to tax allowances for pension contributions for those earning more than £150,000.
Shadow chancellor Ed Balls told BBC Radio 4′s Today programme: “Difficult decisions are needed to get the deficit down. That’s why Labour put up fuel duty in the past. But we often delayed or cancelled planned duty rises based on the circumstances at the time – including at the height of the global financial crisis.”
But Mr Osborne, addressing MPs, said road users would be paying 10p a litre more had Labour still been in power.
Last week Prime Minister David Cameron said the planned duty rise would be “looked at”, but held out little hope for a delay, saying: “I think people sitting at home know that the government doesn’t have a bottomless pit of money.”
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