MOTORING organisations welcomed the decision to scrap a planned rise in fuel duty, warning it would have proved "the last straw" for struggling drivers if it had gone ahead.

The Chancellor said his decision to cancel the increase in fuel duty – due to be rolled out in September – meant petrol would be 13p per litre cheaper than it would have been had the duty not been frozen over the last two years.

He said it would cut the cost of filling up an average family car: "For a Vauxhall Astra or a Ford Focus, that's £7 less every time you fill up," he said.

The level of the now-scrapped increase had not been announced.

Fuel duty has not gone up since January 2011, when it was raised by 0.76p per litre.

It was then cut by 1p in March 2011 and, ever since, planned increases have been postponed repeatedly at a cost of some £6 billion to the Government.

Mr Osborne said: "We have now frozen fuel duty for two years. This has not been easy. The Government has foregone £6bn in revenues to date."

Edmund King, president of the AA, said: "A September fuel-duty hike would have been the last straw likely to break UK drivers' budgets and would have led to a summer of discontent.

"The freeze is a pragmatic move and will bring some relief at the pumps.

"Already 76% of AA members are cutting back on journeys, household expenditure or both, due to the high cost of fuel.

"With current fuel prices at 138.42p for petrol and 145.24p for diesel, drivers will welcome the scrapping of the fuel duty hike with relief rather than with joy.

"Prices are almost 5p a litre higher than when the Chancellor froze fuel duty in March 2011."

Professor Stephen Glaister, director of the RAC Foundation, added: "This news provides breathing space for families being smothered by the soaring costs of motoring, especially the 800,000 households spending more than a quarter of their income on operating a vehicle."

John Lewis, chief executive of the British Vehicle Rental and Leasing Association, said it was a "no-brainer"

He added: "With the economy flirting with recession and household incomes still falling in relation to inflation, the Government just cannot afford to price businesses and households off the road."

However, FairFuelUK spokesman Quentin Willson urged the Government to go further and cut fuel duty.

He said: "Cancelling a rise that really shouldn't happen is not enough.

"The Government needs to cut duty substantially to get the economic growth we all need."

And enviromentalists criticised the move, saying that the cost of petrol was driven by oil prices.

Friends of the Earth economics campaigner David Powell said: "The sensible long-term plan is to protect motorists from rising fuel prices by weaning our transport system off its oil dependency."

Meanwhile, the Chancellor also announced new tax incentives for ultra-low emission vehicles.

This extends a 100% first year tax allowance for anyone buying the vehicles and establishes new company car tax rates from April 2015 for the lowest emitting cars.