The coalition government has announced that it is to postpone the planned 3p a litre increase in fuel duty that was due to be introduced at the start of August until January 2013.
The announcement will lose the government an estimated £550 in revenue to the Treasury but will be popular with the majority of people. Mr Osborne said he would use savings in departmental budgets to pay for it.
The Chancellor, George Osborne, announced in March’s budget that the rise would take place and has reiterated that it would go ahead on at least two separate occasions since.
The planned rise had already been postponed from January 2012, when it was supposed to be introduced and reduced from 5p a litre.
However, this is one budget u-turn that will be welcomed by most consumers and comes after a concerted campaign of pressure by motoring associations and representatives of hauliers.
It will reduce the money into the Treasury's coffers at a time when the government can ill afford it as today's public sector borrowing figures show.
Treasury officials say that the decision has been under consideration since May 28th when ministers met the Governor of the Bank of England, Sir Mervyn King to consider how to respond to the double-dip recession.
Edmund King, President of the AA tweeted: “AA Fuel Price Campaign pays off as Chancellor confirms duty frozen until end of year.”
Mr Osborne told MPs today that fuel duty will be frozen for the rest of the year. Labour had threatened to force a House of Commons vote on the issue.
Mr Osborne said: "We are on the side of working families and businesses and this will fuel our recovery at this very difficult economic time for the world.
"The one-off cost of this change will be fully paid for by the larger-than-forecast savings in departmental budgets."
Shadow Chancellor, Ed Balls said Mr Osborne was a "part-time, U-turning chancellor" who would "not assume responsibility for his own decisions".
However, Mr Osborne countered that if Labour were in power and the fuel escalator was used then UK motorists would be paying an extra 10p a litre.
The move is likely to save a two-car family £6.41 a month in the cost of petrol
Sign up to the Myfinances.co.uk newsletter to receive the latest financial news direct to your inbox.