UK government to scrap planned rise in fuel tax, Sun reports

LONDON, May 16 (Reuters) - British finance minister Rachel ​Reeves plans ⁠to announce next week that ​she will postpone a planned rise in tax on motor fuel that is due ​to ‌take place in September, the Sun newspaper reported late on Saturday. A temporary reduction ⁠in fuel duty, first introduced in 2022, ⁠is due to expire in September, ​which would increase fuel prices by 5 pence (6.6 cents) per litre. However, British governments have repeatedly extended the reduction, most recently in November's annual budget, and ​the Sun ‌said Reeves was poised to do so again.

The newspaper said a government insider had told it: "They have been looking at fuel duty."

Asked about the report, a spokesperson for Britain's finance ministry said: "We do not ​comment on speculation." Global oil prices have risen by around 60% since the start ‌of the Iran war at the end of February.

Prime Minister Keir Starmer and Reeves have both ‌stressed the importance of reducing the cost of living - which opinion polls show is a major concern for voters - but fuel duty is an important source ​of revenue, raising 24 billion pounds in the last financial year.

Britain's budget watchdog bases ‌its forecasts on stated government policy of increasing fuel duty, but said in March that if the government followed past practice of not raising fuel duty, ⁠there would ⁠be a 3.6 billion-pound annual tax shortfall in ‌future years. British government bond prices tumbled on Friday, pushing 10-year borrowing costs to their highest ​since 2008, ​partly on investors' concerns that a leadership challenge to ‌Starmer will either make him spend more or result in him being replaced by a more left-wing figure from his Labour Party.