The chancellor has bowed to pressure from consumer groups and his own parliamentary colleagues by cancelling the planned rise in fuel duty.
George Osborne announced in his autumn statement that he would be freezing the tax on fuel, rather than adding the proposed 3p a litre extra in January. Osborne had already postponed the planned rise on one occasion this year, abruptly announcing in June that the rise due in August would be put off until the start of 2013.
The government averted a backbench rebellion last month, after Labour brought a motion demanding the rise be postponed, by dropping heavy hints that further rises would be delayed again.
It insists that fuel would be 10p a litre more expensive now under plans for a duty "escalator" drawn up by the previous government, which scheduled annual inflation-plus-1% rises until 2014. Osborne cut 1p from fuel duty in the March 2011 budget, but the total tax take, including VAT, accounts for around 60% of the average 133.25p price of a litre of unleaded petrol.
The duty remains at 57.95p a litre of petrol or diesel. The tax brings around £27bn a year into the Treasury, but chancellors have trodden warily since drivers' fuel protests in 2000 threatened to bring Britain to a standstill.
However, critics have asked how the persistent freezes in fuel duty fit with the government's deficit reduction priority – a question most famously posed by Jeremy Paxman to Treasury minister Chloe Smith on Newsnight after the duty U-turn in August.
A recent RAC study found almost one in five motorists were driving less due to the increased cost of fuel.
