Darling hints he will axe fuel tax rise

At the same time, in an exclusive Evening Standard interview, he strongly rejected demands by MPs for a U-turn on higher annual tax on big cars.

"I think the bigger question for motorists, frankly, is the fuel duty," he said. "That's something you pay every week, not once a year, and that is something that we in government are very focused upon."

The 2p per litre rise in fuel duty was announced in the Budget in March and due to begin in October.

Mr Darling's words will be seen as a clear sign he will help motorists and hauliers paying sky-high prices at the pumps. But - despite reports of a reprieve today - he seems determined to face down rebel Labour MPs demanding a U-turn on the plans to clobber gas-guzzling cars with annual vehicle excise duty of up to £455.

It will dismay rebels who backed away from a Commons showdown last night, claiming to have received private signals of a review of the vehicle excise duty increase, which will hit some second-hand family runabouts of up to seven years old.

But he stood firm, saying: "It's always been the case that road tax goes up. There have been many occasionsin the past when governments have changed things that affect the tax on a car, that are different to when you bought your car."

He also claimed the tax would succeed in persuading people to choose greener cars. "Especially now, we have to encourage people to choose the most environmentally friendly car they can."

By contrast, Mr Darling was sympathetic about the surge in fuel costs, driven by global oil prices rising to $142 a barrel, which were "of huge concern for people".

He said: "It's primarily driven by the oil crisis but I will need to look at the increase that's due to come in from next October."

In a wide-ranging interview, the Chancellor defended his recent Budgets and admitted that millions of families were going through "tough times" during the economic slowdown.

As new figures show a further slump in house prices, he signalled help for home buyers, warned MPs against voting themselves a big pay rise and candidly admitted the 10p tax band abolition was a "mistake".

And after claims that he has allowed the Treasury to be pushed around by the Prime Minister, he revealed that some people have urged him to have a public argument with Gordon Brown - a step he says he will never take.

"What I'm not going to do is define myself against the Prime Minister," he said. "People ask me 'why don't you do that', well, I don't think it would be right.

"It's important that every minister, especially the Chancellor, knows his own mind and knows where he wants to go, but equally the Chancellor is part of the Government and we are all in it together."

Mr Darling believes Labour can win a third term, despite the Government's plunging poll ratings, "providing we concentrate on what matters to people and show we have the determination to get through this period".

Despite suggestions from Mr Brown that a downturn was likely to be relatively brief, he argued that Labour could even win if economic recovery did not come before the election.

"People will pass judgment on how they think we have done, but also over which party has the better vision for the next 10 to 20 years.

"They will ask, what are my children's prospects, what are my grandchildren's prospects? I think we have taken the right decisions and I remain optimistic."

He argued that Conservative tax and spending plans did not add up and would not withstand the heat of an election campaign. And he said the Opposition were not willing to take risks like promising to build more housing for aspirant families.

And as the car tax row raged, he revealed that constituents often badger him when he is filling up his tank at the petrol station.

"It's a good experience for a Chancellor to fill his car up - it's one of those occasions you cannot get away from someone who wants to have a word," he said.

His own car is a Ford Mondeo, but he cannot remember the exact model. "It has loads of letters after it but I can't remember what they are," he added.

"It's three years old and it is far more fuel efficient than its predecessor, because it runs on diesel. I think it's a 1.8 litre model, but I'd need to check." Asked whether he and his family had made economies, he replied he was affected by higher food and fuel prices like everyone else. "We are doing what everyone else is doing - as always we count the pennies."

Mr Darling has faced criticism for being too closely identified with Mr Brown.

He refused to say whether they ever argued. "We have lots of discussions. I'm a very levelheaded, even-tempered person, one of the mildest tempered people I've met."

Asked how often he said "no" to the Prime Minister, the scrupulously loyal Chancellor replied: "Read my memoirs - and I'm not writing them yet."

10P DECISION 'WAS A MISTAKE'

GORDON BROWN'S decision to scrap the 10p tax band was "a mistake", the Chancellor admitted.

"We made a mistake, it shouldn't have happened but it did happen and I needed to sort it out," he said.

He defended his decision to give £2.7 billion compensation to basic rate earners, despite criticism that only £700 million went to the poorest losers. "I have yet to hear anyone say they would reverse what I did. It was straightforward, quicker," he said.

He added: "There are people who we still have to see what we can do to help," refusing to say whether they would get compensation in the current year or future years.

MANDELSON'S FRENCH FRACAS

THE Chancellor threw the Government's weight behind Peter Mandelson in the growing row over free trade with French President Nicolas Sarkozy. He said the former Cabinet minister was "absolutely right" and it was "very important" he won a deal to slash food tariffs.

In words that will infuriate the French, he said: "Peter Mandelson's been given a clear mandate by the whole of the European Union. Achieving a successful conclusion in these world trade talks is critical and the single biggest example is food prices."