U-turn over fuel rise

Gordon Brown's planned 2p a litre rise in fuel duty may be postponed until after the general election, it emerged today as some protesters cancelled their nationwide days of action.

Government sources have revealed that it would be " political suicide" to put up petrol taxes if world oil prices fail to drop significantly between now and next spring.

Tony Blair last night welcomed the Chancellor's decision to review the 1.92p duty rise pencilled in for September, declaring that any move would be taken "not on a short-term basis but on the basis of stability of the country".

The Prime Minister added: "Of course we are sympathetic to the concerns of business and indeed motorists."

Mr Brown's action did appear to have an immediate impact as one of the protest groups announced it was calling off a demonstration planned for this weekend.

David Handley, of Farmers for Action, said he was responding to the Chancellor's hints that he would review the tax rise and wanted to wait for the effect of the boost in oil production announced by Opec yesterday.

However, protesters are still planning to hold nationwide goslows next Wednesday, the day before the local and European elections. The Road Haulage Association has also scheduled a demonstration in Edinburgh on 15 June.

But other farmers and hauliers are meeting today to discuss future tactics, with some arguing that they will cancel further protests if the Chancellor agrees to meet them next week.

Andrew Spence, leader of the People's Fuel Lobby, said he was still expecting a large turnout for the go-slow and encircling of Newcastle. "I would like to see two or three hundred vehicles taking part in each protest. I want people to take notice but not cause chaos," said Mr Spence.

Ministers point out that now a strong link between a high oil price and a freeze in duty has been made by both the Treasury and Downing Street, it will be extremely difficult to abandon the principle.

Some analysts believe that rising global demand, together with likely continued instability in the Middle East, make it inevitable that oil will remain expensive for the rest of this year and early into next.

With a general election expected next May, sources told the Evening Standard that although the Government did not want to kow-tow to militant hauliers, it would be "perverse" to go ahead with a fuel duty rise that could trigger a repeat of the 2000 fuel blockades.

However some ministers favour a much tougher approach and want to use troops and the police to swiftly crush any disruptive action at oil terminals.

A clear sign that higher prices could stay in the medium term was underlined today when markets failed to be impressed by Opec's announcement in Beirut of an increase in oil production.