Rachel Reeves is set to announce free summer bus rides for children and tariff cuts on certain food imports, part of a package designed to ease the financial strain from the Iran conflict. The chancellor will deliver a statement to the House of Commons on Thursday, outlining measures to soften the blow of an expected inflation spike later this year.
The offer of free bus travel for kids aged 15 and under during August is the centerpiece of what she's calling the "Great British summer savings scheme." Reeves said: "My number one priority is protecting households from rising costs. This summer I want every family to be able to enjoy themselves, that’s why we’re launching the Great British summer savings scheme, and why we’re helping kids with free bus travel throughout August."
This follows Keir Starmer's announcement that the government will postpone planned fuel duty increases originally set for September and December, and give lorry drivers free vehicle tax. At Prime Minister's Questions on Wednesday, Starmer said: "We are giving our hauliers a 12-month vehicle tax holiday, helping to keep prices down, and we are backing drivers by extending the freeze in fuel duty for the rest of the year." Duty on red diesel used by farmers will also be cut by a third.
The Resolution Foundation criticized the fuel duty decision, noting high-income households benefit most. Principal economist Jonathan Marshall said: "Come the autumn, low-income families - who are still £1,800 poorer than they were before the last energy price shock - will be worst affected by another round of rising food prices and energy bills. And yet the support announced today will primarily benefit those who are better off, with the richest fifth of households gaining more than twice as much as the poorest fifth."
The Treasury estimates the motorist package, including postponing the 5p rise and the red diesel discount, will cost about £400m. Reeves will provide details on funding Thursday. The Treasury hasn't clarified if the full 5p increase will proceed in January, saying timing will be announced at the autumn budget.
Reeves will also outline plans to remove tariffs on imports of biscuits, chocolates, and dried fruits, hoping to cut consumer prices. The Treasury will consult on details. A more ambitious plan to persuade supermarkets to set cheap prices for basic foods collapsed after widespread retailer criticism, with M&S boss Stuart Machin calling it "completely preposterous." The Treasury had hoped for a voluntary deal on staples like eggs and milk in exchange for removing packaging regulations. Machin said: "I don’t think government should be trying to run business. They should try to understand business better."
Reeves's hopes for an economic upturn, bolstered by strong Q1 data, have been dashed by the Iran conflict, which is expected to slow growth and push up inflation. With Andy Burnham eyeing a Labour leadership challenge if he wins the Makerfield byelection next month, Reeves is keen to argue she has "the right plan." Her team noted UK inflation fell to 2.8% in April despite rising fuel prices from the Strait of Hormuz closure, thanks to budget measures reducing household energy bills. She will address rising winter utility bills on Thursday, though Treasury sources stress the magnitude depends on when the strait reopens. Reeves has made clear she won't deliver an across-the-board rescue package like Liz Truss did during the Ukraine conflict.