Rachel Reeves told hammer drivers - but 1 big tax change could leave Labour dead as a dodo

She desperately needs to find a whole lot of money from somewhere and a host of analysts believe Rachel Reeves will bite the bullet and raise a tax that hasn't increased in 14 years. Discussing the merits of hiking fuel duty has become an almost annual tradition. But in the end the inevitable public backlash to any petrol and diesel fuel duty increase scares the Chancellor of the moment just enough for them to sign off another 12-month freeze.

Reeves's need to fill a gaping black hole, however, is so strong that no bets are off the table for what she might do in this month's Autumn Budget. Make no mistake, though - increasing fuel duty would be hugely unpopular among road users and a lot of voters drive. Back in 2022, the Conservatives issued a 5p freeze to help families through the cost of living crisis and extended it throughout their time in office. This was meant as a temporary reduction, but could now be seen as a crippling bind Labour cannot wriggle out of.

Get rid of the 5p cut and approximately 30 million petrol and diesel car owners will see it as a Labour-sanctioned increase on their fuel bills, not a return to the status quo. Leave it as it is, and Reeves misses a chance to make major headway into her black hole - which some estimate to be as big as £50billion.

Sheena McGuinness, Co-Head of Energy and Natural Resources atRSM UK, has warned that by keeping fuel duty frozen we are creating a widening gap in public finances that the government has to tackle.

She explained: "Historically, fuel duty revenues have provided a significant proportion of the UK's tax take, making up almost 7% in 2019/20. In contrast, the Office for Budget Responsibility (OBR) forecasts that fuel duty revenues will represent 2% of total tax revenues in 2025/26."

As a result, she believes it is now "highly likely" fuel duties will be increased in the Budget. Last week, the Campaign for Better Transport and six other leading organisations wrote to the Chancellor demanding fuel duty be increased.

The group claimed that allowing the 5p cut to end in March 2026 would generate a whopping £2.6 billion a year in lost revenue. Meanwhile, they claim that reinstating an annual increase to fuel duty linked to inflation could generate £1.6billion in extra revenue in year one alone.

Ben Plowden, Chief Executive of Campaign for Better Transport, said: "Both the fuel duty cut and the fuel duty freeze have become increasingly fiscally unsustainable. Correcting this long-standing anomaly in transport taxation should be seen as a 'least bad' option that would bring significant social, economic and environmental benefits."

It therefore might seem that increasing the fee is a no-brainer from an economic perspective, but it's not so simple as that. FairFuelUK has pointed out that lower fuel duty rates actually help job creation, business investment, and low-income families.

Meanwhile, Labour are keenly aware that petrol and diesel drivers still make up the majority of road users. A poll conducted by FairFuelUK of 36,000 respondents found that three in four Labour voters in 2024 want fuel duty rates to be maintained or cut even further.

The bigger issue is that it's the system itself that's seemingly failing, with tax revenues dropping as more motorists switch to electric vehicles.

With Labour trying to figure how to stop a rampant Reform from steamrolling them out of Downing Street at the next election, if Reeves make the wrong call she could essentially be signing Labour's death warrant. So to save her party from extinction she really has no choice, if she has any sense, but to opt for another annual freeze in 2025. Then comes the hard bit - figuring out where to get the money from instead.