The maintenance of the status quo comes despite industry expectations and warnings of a fuel duty hike ahead of the Autumn Budget announcement on Wednesday October 30.
“There will be no higher taxes at the petrol pump next year,” Reeves told Parliament in the House of Commons on Wednesday, adding that this measure will come at an annual cost of £3 billion ($3.9 billion) for the UK.
Fuel duty was last altered in March 2022, when the Conservative government cut the tax in order to reduce the burden of high petrol and diesel costs on motorists and freight operators.
The industry as a whole had anticipated fuel duty hikes in Wednesday’s statement but the lack of change has brought relief to groups including the RAC, which said it was “good to see the government firmly recognizing the importance of the car to millions of households up and down the country.”
“Drivers will breathe an enormous sigh of relief after all the speculation that the 5p cut would be scrapped at the same time as pushing duty up beyond the long-term rate of 57.95p,” RAC head of policy Simon Williams said in a statement.
“It’s also worth remembering that even as of today 56% of the total price of a liter of petrol is already tax in the form of fuel duty, and the VAT that is charged on top,” Williams said.
Meanwhile, compatriot motoring organization the AA has also welcomed the lack of change to fuel duty, adding that drivers had “been in suspense since the Chancellor announced there would be painful taxes to fill the Treasury’s ‘black hole’”.
“Since Covid and the start of the Ukraine war, ‘perma-high’ pump prices have inflicted road fuel costs that were well above anything motorists had endured before,” AA president Edmund King said.
The Road Haulier’s Association (RHA) told Fastmarkets that it welcomed the maintained freeze in fuel duty, adding that fuel prices “continue to put a massive strain on budgets with diesel prices higher here than in any EU member state.”
“More could still be done to support these businesses, the essential users of diesel for whom no other affordable choice of fuel exists,” RHA managing director Richard Smith said.
Smith added that “this would go some way to reducing some of the pressures that have driven consumer prices higher.”
The government meanwhile confirmed it would accept the Competition and Markets Authority’s recommendations to implement Fuel Finder, an open data scheme for fuel prices and a market monitoring function by the end of 2025.
“While fuel price reactions are inevitably uncertain and sensitive to wider global factors, by increasing transparency and encouraging competition between forecourts, scenario modelling by the government suggests pump prices could reduce by 1-6p per liter as a result of these measures, helping to ensure that drivers get a fair deal for fuel across the UK,” according to the official Autumn Budget document released alongside the Chancellor’s statement on Wednesday.
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EV incentives
The Chancellor confirmed in Parliament that she would maintain the incentives for electric vehicles (EVs) in company car tax from 2028 and increase the differential between fully electric and other vehicles in the first year rates of vehicle excise duty from April 2025.
Additionally, the Labour government has pledged over £200 million in 2025-26 to accelerate EV chargepoint rollout, which includes funding to support local authorities to install on-street chargepoints across England, as well as new funds of £120 million in 2025-26 to support the purchase of new electric vans via the plug-in vehicle grant and to support the manufacture of wheelchair accessible EVs.
“It is great to see the Chancellor backing electric vehicles in her Budget, with both an extension to the company car tax and changes to [the vehicle excise duty],” EVA England CEO James Court told Fastmarkets, adding that Reeves’ additional funding for charge point infrastructure “is also good news for current and future EV drivers as the UK continues to push forward the transition to a cleaner transport system.”
The AA also welcomed “the continued incentives for EV drivers via an extension of the company car benefit in kind incentives for EVs to 2028 and increased differentials in vehicle excise duty for EVs,” which King said would “give incentives to go green.”
But a lack of incentives supporting the wider rollout of EVs and efforts to bring prices down of the greener vehicles was criticized by industry groups including, UK EV lobby FairCharge.
Founder and Chief Executive Officer Quentin Willson told Fastmarkets he was “very disappointed” in the Budget, “as it offered very little for EV drivers.”
“Labour prefers to spend £3 billion extending the fuel duty freeze yet have repeatedly refused requests for £71 million to reduce VAT on public EV charging,” Willson said.
“Where were the incentives to make it easier and cheaper for drivers to make the switch to electric?” Willson said, a sentiment which was echoed by Gideon Salutin, a senior research fellow at the Social Market Foundation think tank, who reacted on social media stating that the chancellor “could have introduced new subsidies to help poorer people buy EVs.”
Meanwhile, the Society of Motor Manufacturers and Traders (SMMT) called the “lack of substantive measures to support the new car market” – in particular for EVs – “hugely disappointing.”
“We welcome the extension of the plug-in van grant and company car tax benefits, but these alone cannot drive the growth in demand needed,” SMMT chief executive Mike Hawes said in reaction to Wednesday’s Budget.
“With the sector challenged to deliver the world’s most ambitious EV transition targets, achievement of those targets is in serious doubt,” Hawes said, adding that “there must be an urgent review of the market and regulation, else the cost will soon be felt in reduced UK investment, economic growth and jobs.”