The planned 3p-a-litre rise in fuel duty has been delayed until January.
News that Chancellor George Osborne is to postpone the rise in duty, was made on the HM Treasury Twitter account, @hmtreasury, at just before 3pm today. The Tweet said it was to 'help with the cost of living'.
Labour had earlier called on the Government to delay the duty rise, which was due to come into force on August 1.
Shadow Chancellor Ed Balls told the BBC that the Government should delay the increase in an attempt to stimulate the economy, which is back in recession.
'A sensible chancellor takes off his ideological blinkers and does the right thing for the economy and for families,' Balls told Radio 4's Today programme.
He suggested that delaying the rise until January would cost between £500m and £600m, but the £500m saved by the Olympics coming in under budget could offset this loss.
Ed Balls said: 'Difficult decisions are needed to get the deficit down. That's why Labour put up fuel duty in the past, but we often delayed or cancelled planned duty rises based on the circumstances at the time – including at the height of the global financial crisis.'
He also pointed out that global oil prices have fallen by 20% since the start of the year.
AA president Edmund King said: 'We welcome the fact that pump prices have come down over the past few weeks, but the markets are still volatile.
'The AA believes that duty should be frozen because this pumps more consumer spending money into the broader economy.'
Pete Barden & Tom Webster
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