Motorists fear petrol prices are set to surge

The increase, which will add five pence a gallon to petrol and diesel prices, is in line with inflation, it said.

But motoring organisation the AA called it an "appalling state of affairs" for drivers.

The increase in duty was announced in the Budget in April but its implementation was postponed for six months because of uncertainty in the world oil market.

The opposition Conservative party was also critical of the Treasury's move.

Shadow Chancellor Michael Howard said: "At the time of the Budget, Gordon Brown said he was postponing the increase in petrol tax because oil prices were 'high and volatile'. The oil price is now higher than on the day of the Budget."

'Not justified'

The Treasury said: "The volatility of oil prices at the time of the Budget has now diminished and oil prices have become more stable."

But that was angrily rejected by the AA.

Spokeswoman Rebecca Rees said: "There is no justification for the rise in fuel duty given that the situation in the Middle East is still extremely volatile, and that volatility was confirmed yesterday when Opec decided to cut oil production.

Since 2001, fuel duty has been reduced by 13% in real terms HM Treasury

"The gap between what UK drivers pay in motoring taxation compared to what they get back in road transport expenditure is now wider than it's ever been.

"Currently, expenditure is only �1 for every �5 collected in tax."

Including the VAT that would be imposed on top of the rise, the increase would mean drivers doing 10,000 miles a year would pay about �23 more a year for their petrol, the AA said.

Michael Roberts, director of business environment at employers' group the CBI, said: "We need a better way of paying for roads which links charges to the extent and type of road use and gives motorists the quality of network they are already paying for but not getting."

Price rise fear

On Wednesday, oil producers' cartel Opec had said it would cut production by 900,000 barrels a day from November.

It said it was taking the measure to pre-empt a situation where the market was oversupplied.

Opec's stated aim is to keep crude oil prices at about $25 a barrel but the announcement of a supply cut pushed prices well above that level, leading to fears of higher fuel prices.

Freeze

Fuel duties have remained frozen since the 2001 Budget

The Treasury said fuel duty had been "reduced by 13% in real terms" since 2001.

Labour was forced to abandon the controversial "fuel price escalator" it inherited from the Conservatives and faced widespread protests in 2000 about high fuel prices.

The "escalator" meant that prices increased above inflation every year.

The following year, the government cut duty on fuel in the Budget, and it had remained frozen until now, the Treasury said.