A 5p cut on fuel duty should be scrapped in the upcoming Budget, according to the RAC motoring organisation, because drivers are not gaining any benefit.

The RAC has claimed that retailers have failed to pass on lower petrol and diesel prices to motorists and instead have boosted their own profits.

On Wednesday, Prime Minister Sir Keir Starmer refused to rule out a rise in fuel duty in the forthcoming Budget.

Chancellor Rachel Reeves will set out Labour’s first Budget on 30 October, which Sir Keir has warned “will be painful”.

Fuel duty has been frozen since 2011 but in 2022 the then Conservative chancellor Rishi Sunak cut it by 5p per litre. That was extended until March next year.

Simon Williams, head of policy at the RAC, said Ms Reeves “knows the 5p discount is losing the Treasury £2bn a year”.

The UK’s competition watchdog recently found that drivers were still paying too much for fuel, costing them £1.6bn in 2023.

Consequently, the RAC said it had reached the conclusion that Ms Reeves “has no option but to put fuel duty back up”.

“We’d normally be against any increase in duty,” said Mr Williams. “But we’ve long been saying drivers haven’t been benefitting from the current discount due to much higher-than-average retailer margins.”

Sir Keir has refused to rule out any changes to fuel duty. During the election, Labour pledged to protect “working people” by not raising income tax, VAT or national insurance.

In response to whether an increase in fuel duty would be a tax increase for working people, Sir Keir said on Wednesday that Labour would stick to its past promises on tax.

“Beyond that, I’m not going to speculate about the Budget,” he added.