Chancellor John Healey under growing pressure to cut Fuel Duty in this month's Budget to help hard-pressed households as AA joins calls to slash the levy

Chancellor John Healey was last night facing growing calls to slash Fuel Duty in this month's Budget to help out hard-pressed motorists.

AA grandee Edmund King, the motoring group's President, said it was time for the Chancellor to 'put the brakes' on spiralling pump prices amid Labour plans for a crippling Fuel Duty hike in the New Year.

He called for Mr Healey to extend the existing 5p a litre Fuel Duty relief, first introduced by the Tories and set to expire on January 1, while cutting the levy by a further 5p.

Both measures would save drivers 12p a litre at the pumps – or around £6.60 for filling up the average family car – when VAT is included.

It comes after average diesel forecourt prices hit a new record this month by surging past £2 a litre for the first time.

Some forecourts have been charging as much as an eye-watering £2.20 in recent weeks.

AA analysis of the Government's Fuel Finder data found that, at the start of October, more than 2,500 forecourts out of around 8,000 were charging £2 per litre or more for diesel.

Supporters of a Fuel Duty cut point out that high pump prices stoke inflation and are passed on to goods on supermarket and shop shelves as diesel is the backbone fuel of the haulage industry.

Sky-high pump prices have been sparked by the Iran war, which broke out on February 28. Mr King last night joined a growing chorus of voices in recent weeks calling for Fuel Duty to be slashed, saying: 'Drivers need the Chancellor to put the brakes on rising fuel costs.

'The first step must be keeping the existing 5p Fuel Duty cut, but with prices rising we believe the Chancellor should go further and cut another 5p.

'Fuel prices aren't just an issue for motorists. Higher prices increase the cost of moving goods, making deliveries and running businesses, with those costs ultimately finding their way into household bills.

'As underlying fuel prices rise, the Treasury also receives more VAT. We believe the Chancellor should take that additional revenue into account and use the Budget to give drivers and businesses some breathing space.'

According to figures compiled by the RAC Foundation, the Iran war has cost drivers an extra £9.2billion at the pumps since February 28.

This, in turn, has created a £1.5billion VAT windfall for the Treasury, as higher pump prices mean a larger slice of the 20 per cent levy going into the department's coffers.

Under current plans, Fuel Duty will rise by 3p per litre on January 1 – at a time when household energy bills will also surge because of Ofgem's price cap rising – with another 2p rise on March 1.

The Treasury is also scheduled to end the 16-year freeze on Fuel Duty next year, adding a further 1p in April.

VAT will add another 1.2p a litre. The combined 7.2p increase would add almost £4 to the cost of filling up a family car.

Treasury sources have said that 'no decision' has been taken on Fuel Duty increases.

But retaining the 5p duty cut, first introduced by the Tories in 2022 amid sky-high pump prices sparked by Russia's invasion of Ukraine, alone would cost the Treasury £2.4billion a year at a time when Mr Healey is struggling to balance the books.

According to RAC figures, average diesel prices across the UK dipped slightly in recent days to 199.90p a litre for diesel on Friday. Petrol was on average 174.79p a litre.

A Treasury spokesman said: 'As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.'