Jeremy Hunt wants to extend 5p fuel duty cut amid fears that more costs are ‘politically toxic’ 

Jeremy Hunt wants to extend the 5p fuel duty cut for another year, reports claimed last night.

The Chancellor said there was a ‘strong precedent’ to extend the cut on petrol and diesel amid concerns that further costs on motorists would be ‘politically toxic’.

The Treasury is also facing pressure to freeze fuel duty for another year. The decision to press ahead with the two measures would cost the Government an estimated £6 billion.

‘Hunt doesn’t want to do anything that stokes inflation,’ a friend of the Chancellor told the The Times.

‘He keeps telling colleagues the best tax cut for people is a cut in inflation. But the Tories have also frozen fuel duty for a decade, so he gets that it’s a strong precedent to follow, albeit bloody expensive.’

In March last year, Rishi Sunak cut fuel duty by 5p in response to a rise in pump prices caused by the Ukraine war – the first reduction in a decade. The £2.4 billion move runs until March when fuel duty is predicted to rise by up to 25 per cent.

Jonathan Gullis, a former Tory minister and leading campaigner on fuel duty, said: ‘I’ve had many a constructive conversation with Jeremy and believe he understands that keeping the cut in fuel duty will get inflation down and help people in these tough times. It would be political suicide to do anything but keep the 5p cut.’  

But the Treasury remains cautious and will not make a decision until closer to the budget on March 15.

Sir Iain Duncan Smith responded: ‘It’s good he acknowledges we have to cut taxes but the outlook for the economy is pretty strong.

‘I agree the public are not idiots, they want to get the economy growing. Let’s start moving the economy forward by lowering taxes as soon as possible.’

Bank of England governor Andrew Bailey had an optimistic outlook on the economy’s future.

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He said Britain had ‘turned a corner’ on the cost of living after the headline inflation rate dipped to 10.5 per cent this week, adding that the Bank now expected it to ‘fall quite rapidly this year’.

Earlier this week Labour warned that the estimated 12p fuel duty hike this spring would inflict ‘yet another shock’ on our economy.

Shadow chancelllor Rachel Reeves told The Times: ‘With so many families and businesses reliant on their cars the government must rule out yet another fuel duty rise at the budget to prevent yet another shock to our economy.’

Meanwhile, the head of Norwegian energy giant Equinor has cautioned that worldwide markets will not return to pre-pandemic prices.

Anders Opedal told the BBC the transition from fossil fuels to renewables would keep costs higher.

‘This will require a lot of investment and these investments need to be paid for, so I would assume that the energy bills may slightly be higher than in the past but not as volatile and high as we have today,’ he said.

Speaking as the World Economic Forum gets under way in Davos, Mr Opedal said society ‘needs to treat energy as something that is not abundant’.

Tory MPs also reacted with alarm earlier this week when Treasury insiders confirmed the Chancellor was planning a ‘slimmed-down’ statement on March 15, with no proposals for tax cuts.

Mr Hunt has warned ministers that the public finances will be no better in March than they were in November when he raised taxes to a post-war record – and cutting them now would prolong the pain of ‘stubbornly high’ inflation. He is expected to unveil a plan for growth but sources said there was ‘no money’ for tax cuts to help kickstart the flagging economy.

A Treasury insider ruled out any ‘deviation’ from the drive to halve inflation, which fell slightly to 10.5 per cent yesterday.

The hardline stance triggered warnings from Conservative MPs that the Chancellor needed to return to the party’s traditional tax-cutting agenda this year.

Allies of Boris Johnson are among those who believe that tax cuts are essential to the Tory party’s electoral prospects.

Meanwhile sources close to Liz Truss said she was set to use her first public intervention since leaving No 10 to make the case for lower taxes. The former PM attended the launch on Tuesday of a new Conservative Growth Group of MPs.