In his speech Mr Osborne said that he was cancelling the 2p-a-litre rise due next September and would be freezing fuel duty until May 2015.

He added that the move means that compared with the previous government’s plans, petrol will be 20p a litre less. ‘That’s £11 less every time you fill up. A saving for drivers over this Parliament of £680,’ he said.

Mr Osborne had indicated intentions to freeze fuel duty at the Tory party conference in October if funds were found. In his speech today he said that ‘because we have taken difficult decisions to control the public finances, I can deliver on that promise’.

In response, the AA commented: ‘Cancelling fuel duty next year tells drivers that the Government is trying to help offset some of the impact of highly volatile pump prices over the past two years. At the pump, a 2p-a-litre increase would have been equivalent to a £1 a tank increase for small cars and £1.40 for Mondeo family.

‘Pump prices that have shot up 8p to 10p a litre on occasions during 2012 and 2013 have sapped drivers ability to get by: up to 76% of AA members have had to cut back on car use, other spending in the family budget or both. Let’s now hope that the players in the oil and fuel markets don’t cancel out the Chancellor’s generosity.’

The differential between the main rate and the LPG rate will continue to reduce by 1p a litre each year to 2024. The Government says it will review the impact of the incentives on vehicle uptake and the public finances at Budget 2018. The Government says it will also seek European Union approval to apply a reduced rate of fuel duty to methanol.

Mr Osborne also announced that the UK will abolish the paper car tax disc system, moving to an electronic system instead. Drivers will also now be able to pay by monthly direct debit rather than with a payment every year or six months.

A number of road and fleet organisations have been campaigning for the Department for Transport to axe the tax disc for several years as part of a wider streamlining of DVLA services, including the BVRLA, which has previously said that ‘removing this pointless piece of paper would save the government around £90m a year and produce major administrative cost savings for fleet operators as well’.

Yesterday also saw the Government unveil its infrastructure spending plan, which will see over £375bn of planned public and private sector infrastructure investment and includes plans to target public sector fleets with EVs and to drop the A14 toll.