Drivers enduring high petrol prices were given some respite after a planned 3p a litre rise in fuel duty in January was cancelled.
Chancellor George Osborne said the price increase planned for January would be ditched altogether, while the further 5p rise due in August next year would be only 3p higher than prices are now.
Mr Osborne said millions of people used cars to go to work and pick up children from school, and that for most people their vehicle was not a luxury but a necessity.
Having already cut fuel duty by 1p in the Budget earlier this year, Mr Osborne said that families would be saving £144 on filling up the average family car by the end of next year.
AA president Edmund King said: “The Chancellor has seen sense on this vital issue.
“Cash-strapped drivers will heave a heavy duty sigh of relief, as current pump prices are close to the record high.
“This measure will not only be a relief to drivers, but also to the high street – drivers have less to spend if more money is pumped into their tanks.”
Prof Stephen Glaister, director of the RAC Foundation, agreed, saying: “This is good news. Figures out today show transport is the single biggest area of expense for the average household, with £1 out of every £8 going on motoring.
“On paper, the scrapping of the 3p fuel duty rise in January will cost the Chancellor about £1.5bn, but it will bring real respite to the nation’s 34 million drivers and mean they can get out and contribute to economic growth, which should be good news for the Treasury.”
The Freight Transport Association also welcomed the news, highlighting how the industry has been devastated by the soaring fuel costs.
Chief executive Theo de Pencier said: “We have avoided a horrendous New Year’s hangover... January’s rise would have cost the industry around £325m.
“But while we are relieved that the Chancellor has steered us out of immediate danger, it is obvious that getting the UK back on the road to recovery requires a long-term fuel duty strategy, and one which doesn’t make tough times that much tougher for businesses in an already uncertain economy.
“Today’s decision will help to keep the wheels of industry turning and shows that Government has listened. However, the Chancellor has not been bold enough. He should have ruled out the planned 3p per litre duty rise in August 2012 as, if world oil prices remain high and above $100 per barrel into next year, it will still hit industry hard.”