Rachel Reeves is set to collect the equivalent of up to £1.1 billion extra a year from drivers as rising fuel prices increase the amount of Value Added Tax paid at the pump. Analysis based on official consumption data shows that higher petrol and diesel prices since the start of the Iran conflict are generating tens of millions of pounds in additional tax revenue each month.

Average petrol prices have risen by more than 7 pence per litre, while diesel has increased by more than 15 pence per litre. With the United Kingdom consuming billions of litres of fuel each month, the higher prices mean the Treasury receives significantly more in Value Added Tax, potentially amounting to nearly £100 million extra per month combined.

Campaigners and opposition politicians argue the windfall gives the government room to delay or cancel a planned 5 pence per litre fuel duty increase due in September. The Chancellor has said she is reluctant to scrap the rise but confirmed the policy remains under review as fuel costs continue to climb.