Labour retains 5p fuel duty cut for 2025

Labour’s first budget after years in opposition has been delivered by Chancellor Rachel Reeves, with motorists celebrating a decision to maintain the freeze on fuel duty introduced in 2011, and to extend the 5p ‘cost of living’ cut in fuel duty for another year.

Against a challenging economic background Reeves introduced a package she described as ”restoring economic stability and turning the page on 14 years”. That meant setting out measures across the economy designed to raise taxes overall by £40 billion, but she confounded many pundits with a pledge to retain the 5p fuel-duty cut.

“To retain the 5p cuts and to freeze fuel duty again would cost over three billion pounds next year at a time when the fiscal position is so difficult,” she told the House of Commons. “I have concluded that in these difficult circumstances, while the cost of living remains high and with a backdrop of global uncertainty, increasing fuel duty next year would be the wrong choice for working people. I have decided today to freeze fuel duty next year, and I will maintain the existing 5p cut for another year.”

The Chancellor has also committed to maintaining existing company-car tax incentives beyond 2028, and says she will increase the differential between fully electric and other vehicles in the first year of Vehicle Excise Duty (road tax), with an increased revenue take of £400 million. 

Earlier this month Auto Express wrote to the Chancellor urging her not to tighten the screws on drivers, but instead to keep Labour’s promise to fix Britain’s broken roads. We also pointed out that drivers wouldn’t accept attempts to excuse fuel duty or VED tax hikes by citing unpopular and unrealistic green targets, and urged her not to justify rises as levers to push drivers towards EVs that many can’t afford.

When we polled Auto Express readers about their expectations from the budget, an overwhelming majority - 72 per cent - wanted the Chancellor to address crumbling, pothole-infested roads. Transport Secretary Louise Haigh promised £8.3bn of scrapped HS2 funding would be targeted to fixing a million potholes annually during her pre-election campaign, but Reeves committed only to spending an additional £500 million of that sum on road maintenance next year. 

“For too long, potholes have been an all too visible reminder of our failure to invest as a nation,” she said. “Today that changes with a £500 million increase in road maintenance budgets next year, more than delivering on our manifesto commitment to fix an additional one million potholes each year.” 

Almost a third of Auto Express readers listed the car-crime epidemic as one of their priorities, but there were no measures in the budget to address this.

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