Labour has collected an extra £1billion in VAT from drivers since the outbreak of the Iran war pushed up petrol and diesel prices, according to RAC Foundation analysis, prompting fresh calls for Chancellor John Healey to scrap a planned Fuel Duty increase due in January. The windfall arises because VAT, charged at 20 per cent, generates more revenue when pump prices are higher, and Conservative critics argue ministers should use the extra money to spare motorists further pain rather than let a temporary 5p-a-litre duty cut expire as planned on New Year's Day.

The analysis found that since the conflict began on 28 February, drivers have collectively paid an extra £6billion at the pumps, with diesel motorists bearing £4.3billion of that and petrol drivers £1.7billion, generating £713million and £289million in additional VAT respectively. Filling a typical 55-litre tank now costs £15 more for petrol and £20 more for diesel than before the war, with average prices at 161.46p a litre for petrol and 181.84p for diesel; prices had eased after a June peace deal with Tehran but have risen again since renewed US strikes on Iran disrupted shipping through the Strait of Hormuz, where daily traffic has fallen from around 130 ships to just eight.