Labour has said it will attempt to force the government to delay the 3p-a-litre rise in fuel duty due to come into effect in August.
The government will not go ahead with a 3p-a-litre rise in fuel duty in August, Chancellor George Osborne has announced.
When MPs debate the Budget next week, the party will put down an amendment seeking to put off the increase until at least January next year.
The move follows a campaign by road users' groups, who argued the change, announced in the Budget, would damage the economy.
Shadow Chancellor Ed Balls said the government should "do the right thing" for the economy and families.
Fuel duty will be frozen for the rest of the year, the chancellor told MPs.
A Treasury source said the rise was a hangover from Labour's final Budget.
Labour had threatened to force a House of Commons vote on the issue.
The source, speaking to the BBC, accused Labour of "hypocrisy", adding that Mr Balls had voted for the rise at the time.
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 source said the government had taken action to ensure that fuel was 10p cheaper than it would have been under a Labour government.
The government was "doing everything we can in very, very difficult economic circumstances", he added.
'Ideological blinkers'
But Mr Balls said Chancellor George Osborne was in charge now and it was up to him to respond to the fact that economy was in recession and in need of a boost.
"He can't blame what happened two years ago," Mr Balls told BBC Radio 4's Today programme.
"A sensible chancellor takes off his ideological blinkers and does the right thing for the economy and for families."
Transport Secretary Justine Greening has said consumers should challenge the petrol retailers to cut prices at the pump, as the global oil price has come down considerably.
Mr Balls said he did not understand the logic of Ms Greening's position.
"Since the beginning of the year there's been a 20% fall in the oil price but so far no fall in the pump price for motorists.
"The government's got a decision to make in the next few weeks - do they go ahead with this duty rise in August?
"In my view, the government should be pressurising the oil companies to get the pump price down not giving the oil companies an excuse to raise prices by 3p or 4p a litre."
'Difficult decisions'
'Difficult decisions'
Labour said putting off the rise until next year would cost between £500m and £600m.
In last year's Autumn Statement Mr Osborne cancelled a scheduled 3p rise in fuel duty for January this year but said another planned rise this August would proceed - although it would be cut from 5p to 3p.
It suggested paying for it with the £500m underspend in the Olympics budget or by closing tax loopholes and reversing changes to tax allowances for pension contributions for those earning more than £150,000.
BBC political editor Nick Robinson said the chancellor had responded to pressure from some Conservative MPs and The Sun newspaper - in which Labour's Ed Balls had an article on the subject on Tuesday - who have called for the planned rise to be dropped.
Mr 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."
Labour had called for the increase to be delayed until next January, saying the cost between £500m and £600m could be covered by the underspend on the Olympics budget or by closing tax loopholes and reversing changes to tax allowances for pension contributions for those earning more than £150,000.
Last week the prime minister said the rise would be "looked at", but held out little hope for a delay, saying: "I think people sitting at home know that the government doesn't have a bottomless pit of money."
Shadow chancellor Ed Balls told BBC Radio 4's Today programme: "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."
One Liberal Democrat MP and several Conservatives have already indicated their support for calls for the rise to be scrapped.
But Mr Osborne, addressing MPs, said road users would be paying 10p a litre more had Labour still been in power.
FairFuelUK, which campaigns for lower fuel prices, said hiking fuel duty by 3p per litre on 1 August "makes no sense either politically or economically" and would be a "toxic issue" for voters.
Last week Prime Minister David Cameron said the planned duty rise would be "looked at", but held out little hope for a delay, saying: "I think people sitting at home know that the government doesn't have a bottomless pit of money."
Its spokesman, Quentin Willson, said: "MPs of all parties need to have the courage of their convictions, put party issues aside and come together to vote against the rise."
Last month, Transport Secretary Justine Greening said she would consider legislating if the fuel retailers did not pass on falls in oil prices to their customers.
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