Labour Peer and Iceland Chairman Calls on Reeves to Abandon Fuel Duty Rise

Lord Walker, the Labour peer and executive chairman of Iceland, has added his voice to a growing chorus of business leaders pressing Chancellor Rachel Reeves to abandon plans to end a long-standing 5p cut in fuel duty, with the scheduled expiry of that relief in September now drawing renewed scrutiny amid elevated oil prices driven by the ongoing Iran war.

Appointed by Prime Minister Sir Keir Starmer earlier this year to inject private-sector insight into the Government’s approach to the cost of living crisis, Lord Walker made his position clear during an appearance on BBC Radio 4’s Today programme. Speaking directly to the question of fuel duty, he said the Government ought to be “thinking and talking about extending it or enlarging it,” citing the example of Australia, where Prime Minister Anthony Albanese has moved to halve fuel duty in a measure projected to save motorists 26 cents per litre at the pump.

Lord Walker’s remarks place him in alignment with Lord Wolfson, the chief executive of Next and a Conservative peer, who has argued separately that ministers possess the fiscal headroom to reduce fuel duty, contending that any revenue lost to a duty cut could be offset by reductions in the Treasury’s overall tax take on fuel, effectively “balancing the books.” Lord Walker acknowledged the argument, describing Lord Wolfson as “a great guy and very intelligent” who “might have a point there.”

The backdrop to these interventions is a sharp deterioration in pump prices since the commencement of hostilities in Iran. According to data from the RAC, diesel has surged by 30 per cent since the conflict began, rising by 42.9p per litre to 185.23p, while unleaded petrol has climbed by 21.6p to 142.38p per litre. The disruption stems principally from constrained shipping through the Strait of Hormuz, a critical chokepoint through which approximately one fifth of global oil and gas exports normally transit.

The Chancellor has sought to deflect accusations that the Treasury is benefiting from the crisis, dismissing suggestions that the Government is reaping a windfall of approximately GBP 20 million per day through higher duty and VAT receipts on elevated fuel prices. Lord Walker, for his part, acknowledged the pressures facing the public finances, describing them as a “sticky situation,” but maintained that the Government should “work with business to try and come up with solutions.”

International precedent lends weight to the case being made by Walker and Wolfson. Ireland has reduced fuel duty by approximately one fifth, whilst Poland has moved to slash VAT on fuels from 23 per cent to 8 per cent. In Australia, the Albanese administration’s decision to halve duty represents one of the more aggressive fiscal interventions seen among comparable economies in response to the oil price shock.

Lord Walker used the same platform to reiterate his broader concern about potential profiteering in the energy and fuel retail sectors. Having previously urged the Government to impose a temporary profit cap on energy companies and petrol retailers, he maintained on Friday that the Government should deploy its existing powers to place businesses on notice against exploiting the crisis for commercial gain, though he noted he had not yet seen direct evidence that supermarkets themselves were profiteering from the conflict’s impact on supply chains.

With September approaching and no formal policy revision announced, the pressure on the Chancellor to reconsider the fuel duty trajectory is intensifying from both sides of the political aisle and across the business community. Whether Reeves moves to extend or deepen the existing relief will be closely watched by retailers, hauliers, and consumers alike, for whom fuel costs represent a significant and unavoidable input into household and commercial budgets.