Fuel Duty: Chancellor Osborne Under Pressure

Chancellor George Osborne may bow to demands and delay a planned fuel duty hike amid fears it will hit struggling families.

Tory rebels had been planning to break ranks and vote with Labour in an Opposition debate on Monday calling for the 3p increase set for January to be delayed.

They believe the rise, first delayed in August, will ramp up anger because it is due to coincide with rail and bus fare increases and the changes to child benefit.

But now rebel leader Robert Halfon has said he will vote with the Government after all and wait to see what Mr Osborne does in his Autumn Statement next month.

He said: "The cost of fuel is the number one issue, that's why I am campaigning on it. I have had discussions with various people and it is my view that the Government is in strong listening mode.

"If I didn't believe that I would make a point and go in to the lobby with Labour."

In a further hint at a postponement, the Prime Minister's spokesman said on Monday: "What the Government has sought to do is to listen to the concerns of motorists and cancel and delay where it can."

Campaign group FairFuelUK claims the planned tax hike would only raise £800m, compared with Treasury projections of £1.5bn, and cost also cost up to 35,000 jobs.

The group's spokesman, broadcaster Quentin Willson, said: "The momentum building up behind FairFuelUK's call to see this damaging 3p rise scrapped is becoming unstoppable.

"The Treasury appears to be listening. We welcome Labour pushing on this issue. Consumers are currently paying an eye-watering 80p per litre in combined fuel duty and VAT.

"This is socially unjust and adding another 3p in tax doesn't make sense for economic recovery and deficit reduction."

Shadow chief secretary to the treasury Rachel Reeves added: "With our economy so fragile and prices still rising faster than wages, it would be wrong to go ahead with another tax rise on families and businesses.

"To boost our flatlining economy, Labour has already called for a temporary VAT cut which would take 3p off a litre of fuel. But if ministers won't do this, the very least they could do is axe January's fuel duty rise at least until April.

"And they could pay for this by clamping down on known tax avoidance loopholes, like the one used by some employment agencies to falsely inflate expenses."

Brian Madderson, chairman of the Petrol Retailers Association, called on the Government to cancel the hike entirely.

He said: "To defer would mean that it could combine with the planned duty rise on 1 April 2013 to push pump prices up by 7p per litre and that would really wreck any economic recovery, hammer inflation and hit household budgets very hard.

"Such a rise would be without parallel since fuel taxation commenced."

A Treasury spokesman said: "The Government recognises that the rising price of petrol is a significant part of households' day-to-day spending.

"Since coming to office, the Government has listened to the concerns of motorists about high pump prices and acted. Fuel is now 10p a litre lower than under the previous Government's plans."