Fuel duty cut by 1p a litre from today

Delivering the 2011 Budget, Chancellor George Osborne has surprised Parliament by introducing a raft of changes to fuel duty charges which begin immediately with a penny per litre drop in fuel duty at 6pm today.

The inflation plus 1p annual escalator introduced by the previous Labour government has been canned for the life of this parliament and next week's inflation-only increase in fuel duty - which would have meant a 5p per litre rise - has been postponed until 1 January 2012.
Speaking to MPs the Chancellor said: "Governments are not in charge of the oil price, but we are in charge of the duty we put on it. It's about doing what we can to help with the high cost of oil."

He criticised the Labour administration in power before him, telling the Commons that he had inherited eight planned rises in fuel duty from previous Treasury ministers.

The inflation-only increase in fuel duty planned for April 2012 has been deferred until 1 August next year, giving motorists a year free of inflation rises on petrol in 2011.

The Chancellor also announced that a fuel price stabiliser would also be introduced in the coming weeks to ease the burden on drivers when oil prices are high.

The moves are a surprise addition to the Budget, where commentators predicted that the Chancellor would simply cut the fuel duty increase planned for next week.

Shadow chancellor Ed Balls has criticised the Chancellor, saying that he was deceiving motorists: "In real terms the price of petrol could go up by 2p a litre this year." He has described the government's fuel duty plans as "laughable".

It should mean that campaigners like Quentin Willson and his friends, who have been lobbying the government for months to ease the burden on UK motorists, are suitably appeased.

The AA has called the Chancellor's decision a "much needed tourniquet to drivers haemorrhaging money from record pump prices", but raised concerns that volatile oil prices could cancel out the benefits of the fuel duty changes.

AA president Edmund King said: " A £2.50-a-tank hike would have been the last straw for poorer drivers who spend a quarter of their household income on motoring. This action has probably stopped a 'summer of discontent' and is a common sense move."

The Freight Transport Association has welcomed the benefit the changes in fuel duty will have on commercial haulage companies. FTA chief economist Simon Chapman said: ""By cutting fuel duty by 1p per litre, the Chancellor has effectively saved industry £125m this year. FTA fought hard for future rises to be set on a budget-by-budget basis with decisions reflecting world oil prices."

Chief economist at financial firm KPMG, Andrew Smith, said: "Last year was the preview, this year austerity is for real with tax rises and spending cuts. Today's concessions are small beer in comparison. The surprise was the cut in fuel duty – financed by the North Sea supplementary charge - aimed at the headlines but nevertheless still welcome to struggling consumers."

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