Drivers will pay £15 less than expected for each tank of petrol, after a planned rise in fuel duty was scrapped.
Rishi Sunak said motorists had cumulatively saved £1,900 as a result of the tax being frozen by the Government since 2011.
The Chancellor pointed to a recent rise in the cost of petrol, which hit its highest-ever level of 142.94p for an average litre on Sunday, up 28p over the last year.
“With fuel prices at the highest level in eight years, I’m not prepared to add to the squeeze on families and small businesses,” he told MPs on Wednesday.
“So I can confirm, the planned rise in fuel duty will be cancelled. That’s a saving over the next five years of nearly £8 billion.”
The current rate of duty on a litre of petrol is 57.95p.
Mr Sunak said the freeze would save motorists £15 on average for a tank of fuel for a car, £30 for a van and £130 less for an HGV, compared with the projected rise.
Fuel duty has been due to rise in the last two Budgets, but the Chancellor had been widely expected to scrap the planned increase of 2.84p per litre after supply chain issues caused shortages and price rises across the UK.
An increase was postponed in March due to the ongoing impact of the coronavirus crisis.
Motoring groups have previously warned the price of petrol could rise from its current level to more than 150p per litre because of the increasing cost of oil.
Last month, Goldman Sachs said that global oil prices could continue to climb to $90 a barrel by the end of the year, while the Bank of America said Brent crude could hit $100 a barrel within months.
It is estimated that a $100-per-barrel cost of oil would translate to a 150p per litre average cost of petrol in the UK.
The RAC has also warned that petrol retailers have inflated the cost of fuel and increased their profit margins by 4p a litre, from around 5.5p in April last year to 8.59p.
The group said that many businesses were trying to recoup profits they lost during last year’s lockdowns, when demand for fuel fell sharply.
The Prime Minister’s official spokesman hinted that the freeze could be extended, saying on Tuesday: “We recognise rising fuel costs are a challenge for the British public.”
Mr Sunak has been urged by MPs on the Tory backbenches to maintain the freeze, including from members representing seats in the “Red Wall” in the north of England.
MPs in the Northern Research Group caucus of Conservative MPs told the Chancellor: “Those in the North rely on cars to go to work, to take their children to school, and to put food on the table.
“Any rise in fuel duty puts a barrier in the way of people accessing well-paying jobs and taking care of their families. Cars for our constituents aren’t a luxury, Chancellor, they are a necessity.”
Simon Williams, the RAC’s fuel spokesman, said: “We welcome the Chancellor’s confirmation that duty will continue to remain frozen at 57.95p a litre until next year.
“With pump prices at record highs, now would have been the worst possible time to change tack and hike up costs still further at the forecourt.”
Fairfuel, a group that campaigns on fuel price, said the duty should have been lowered rather than frozen.
“UK drivers still remain one of the world’s top three nations [of] highest-taxed motorists, face an uncontrolled pump pricing lottery, congestion, and clean air charges plus a perpetual demonization for all the environmental ills of our planet,” said a spokesman for the group.
Brian Madderson, chairman of the Petrol Retailers’ Association (PRA), said: “PRA has been lobbying the Government and the Treasury, in particular outlining the potentially damaging effects on the economy and household budgets of even an inflation-linked rise, so it is positive to hear the Chancellor’s commitment.”
Mr Sunak’s Budget did not contain any other announcements on motoring, despite reports the Treasury was considering introducing a road-pricing scheme to replace the existing system of vehicle excise duty.Internet Explorer Channel Network