The 5p per litre discount for fuel, which is currently in place, will remain until March 2024 collectively saving drivers around £5bn.
Petrol prices were expected to rise by 11p but this hike has been scrapped, as confirmed in the budget today by Chancellor, Jeremy Hunt.
Fuel duty is levied at a flat rate of 52.95p per litre for both petrol and diesel and it was expected to rise to 57.95p per litre.
Fuel duty has remained frozen for 13 years now and the government introduced the 5p cut to fuel duty a year ago, in the Spring Statement.
In the last year fuel prices have soared, in part because of the Russian invasion of Ukraine. But they have fallen significantly since the peak last year, from over £1.91 per litre in July to around £1.48 today for petrol.
RAC head of roads policy Nicholas Lyes, said: “We welcome the government’s decision to keep the 5p fuel duty cut in place for another 12 months.
“The cut has given drivers some much-needed relief in what has been the most torrid year ever at the pumps, with price records being broken even after duty was cut. Given the importance of driving for consumers and businesses, duty should be kept low to help fight inflation.”
Cheaper beer in pubs
The tax on alcohol will rise by 10.1 per cent in August. However, draught relief will rise from 5 per cent to 9.2 per cent for beer and cider and from 20 per cent to 23 per cent for wine and spirits.
The duty applied to draught beers sold in pubs will be 11p cheaper than the duty placed on these drinks when sold in supermarkets.
The Chancellor announced the changes as part of a “Brexit Pubs Guarantee”.
The duty on cigarettes will rise by the RPI rate of inflation, plus 2 per cent, adding almost 15 per cent and around £1.75 to a pack of cigarettes.
Sarah Coles, head of personal finance for Hargreaves Lansdown, said: “Duties are one area where the government can raise or cut prices at a stroke, so it’s heartening to see they have stepped in on behalf of drivers.
“Frankly, after such a long freeze of fuel duty it would have been a surprise if they raised prices right now.”
