Motorists enjoying a rare reprieve at the pumps could soon be hit with a stinging new tax, if billionaire tycoon John Caudwell gets his way.

The Phones 4u founder, who famously abandoned the Conservatives to back Labour, has called on Chancellor Rachel Reeves to slap an extra 10p per litre onto petrol and diesel.

He claims the measure would raise £20 billion for the Treasury and argues now is the time to act, as fuel prices have fallen sharply since their peak.

The price of petrol and diesel has come down from around 190p a litre three years ago to less than 140p now, which he argues creates the space for the tax raising measure.

He argues the move, although controversial, is a better option than other unpopular increases in taxes in order to fill a black hole in government coffers.

“I’ve discussed this with Rachel Reeves,” he told LBC.

“Look, it wouldn’t be popular, but none of this needed to happen if we put 10 pence on a litre of petrol.

“Yeah, everybody listening to this programme will be horrified … but that would raise £20 billion and save all of this problem that hits people.

“Petrol has come down from 190p to about 140p now.”

He added that targeting motorists would be less damaging than tax raids on other sectors like farming, saying: “I think there’s just much better ways … of generating income that don’t suddenly demolish individual sectors, like the farmers, for instance.”

Cheapest fuel in two decades – in real terms

Mr Caudwell’s suggestion comes as new figures show that fuel is cheaper now in real terms than at any time in more than 20 years.

According to a recent report, the average cost of petrol is 131.35p per litre – and when adjusted for inflation, that’s lower than it was in December 2001. This is despite public perception that motoring costs remain sky-high.

Experts point to a decade-long freeze in fuel duty, a 5p temporary cut introduced in 2022, falling global oil prices, and a stronger pound as key factors behind the price drop.

Supporters of a duty rise argue the Treasury could claw back billions without pushing prices back to crisis levels seen in 2022. However, there are questions about how much could be raised with some estimates suggesting a 10p rise in duty would raise around £5.5bn-£6.5bn a year.

The idea comes from a man who once gave £500,000 to Boris Johnson’s election campaign – but who now says Britain needs “a strong Labour government” capable of taking bold economic decisions.

Mr Caudwell, estimated to be worth £1.5 billion, says he finds Reeves more “commercially-minded” than many in the previous Tory administrations.

The Chancellor is currently scouring for revenue sources to plug a £22 billion shortfall in the public finances – but any hint of a fuel duty rise risks igniting political fury.

Mr Caudwell’s idea has already provoked a backlash on X with hundreds of people rejecting the idea.

One complained: “Another tax proposed by a billionaire which would disproportionately impact the poorest.”

Another warned: “It would ruin people and businesses with knock-on effects; everything would go up, except, of course, for pay.”

Others questioned the logic entirely, pointing out that lorries – which average around 10mpg – would simply pass the cost onto consumers, fuelling inflation and making essentials more expensive.

While the chancellor has so far kept her counsel on the future of fuel duty, policy analysts at the IFS, Evelyn Partners, and even the Office for Budget Responsibility say fuel duty reform may be inevitable as the country shifts toward electric vehicles and fuel tax revenues continue to dwindle.