The fuel duty will be kept at 57.95p per litre for 2016/17, marking the longest freeze in 40 years, Budget documents show.

In his Budget 2016 speech, George Osborne said: “In the last twelve months, petrol prices have plummeted. That is why we pencilled in an inflation rise.

“But I know that fuel costs still make up a significant part of household budgets and weigh heavily on small firms. Families paid the cost when oil prices rocketed; they shouldn’t be penalised when oil prices fall.”

Insurance Premium Tax increased

Osborne also announced Insurance Premium Tax (IPT) will be increased by 0.5%, less than the 3% rise which was predicted before the Budget.

IPT is levied on insurance companies but it usually passed on to consumers through higher insurance costs.

It was increased from 6% to 9.5% from 1 November 2015 and from 1 October 2016, it will rise to 10%.

The chancellor said that where the additional costs are passed on to customers, the average home and contents insurance would “only increase by £1” while the average motor insurance premium would add an extra £2 to policies per year.

All the revenue from the increase in IPT will be invested in flood defences, Osborne confirmed.

Edmund King, AA president, said: “The chancellor has listened to our campaign against a 3% hike in IPT and 0.5% increase is better than expected. Using it for flood defences is helpful but it simply replaces past spending cuts and in effect targeting motorists to pay for flood alleviation is robbing Peter to pay Paul.”

He added that the latest 0.5% IPT increase will add £2.86 to the average motor policy and £6.19 to young driver premiums.

However, insurance research firm Consumer Intelligence said drivers aged over 60 will be hardest hit as premiums have already increased by 20% in the past year. It said drivers should “shop around” to ensure they get the best price for their insurance policy.

Tobacco

Osborne has continued his warfare on tobacco by announcing that duty will rise by more than inflation each year as part of the ‘tobacco duty escalator’.

From 6pm today, tobacco duty on cigarettes will rise by 2% above inflation.

Hand-rolling tobacco is currently taxed at a lower rate than cigarettes but the chancellor will increase the duty on these by an additional 3% to 5% above RPI (inflation).

Alcohol

The duty rates on beer, spirits and most ciders will be frozen this year.

The duty rates on most wines and higher strength sparkling cider will increase by RPI from 21 March 2016.

Sugary drinks

A ‘soft drinks industry levy’ will be introduced from April 2018 and will be paid by producers and importers of soft drinks that contain added sugar.

The levy will be charged on the total sugar content and two bands will be introduced: a main rate charge for a drink which has above 5g of sugar per 100ml and a higher rate for those with more than 8g per 100ml.

However, smaller operators will be excluded and the government will need to consult on the details over the summer.

The revenue will be used towards helping schools provider physical education.

Richard Stone, chief executive of The Share Centre said shares in companies such as Britvic and AG Barr (makers of Irn Bru) have already dropped sharply this afternoon while Jasper Lawler, market analyst at CMC Markets said Tate and Lyle slumped 6% following the Chancellor’s speech.