Reeves to Set Out UK Cost of Living Plan to Cushion Iran Hit

Article content

(Bloomberg) — Chancellor of the Exchequer Rachel Reeves will detail a package of measures to ease cost-of-living pressures on Thursday, as the British government tries to limit the impact of the Iran war.

Article content

Reeves, who is expected to give a statement in Parliament at about 11:30 a.m., will announce plans including free bus travel for kids throughout August and the prospect of cuts to agri-food tariffs, the Treasury said in a statement, dubbing the interventions “Great British Summer Savings.” The moves come in addition to a freeze on fuel duty until the end of the year that was announced by Prime Minister Keir Starmer on Wednesday.

Article content

Article content

Article content

“My number one priority is protecting households from rising costs,” Reeves said in the statement. “This summer I want every family to be able to enjoy themselves.”

Article content

Article content

Reeves’ latest measures come against the backdrop of a political crisis facing Starmer, who is fighting to stay in post as prime minister following a mass revolt from his Labour members of Parliament, which in turn threatens her own position as finance minister. But Reeves has nevertheless been boosted by positive economic data in recent days, including UK inflation falling to its lowest rate in more than a year and the UK posting the best growth among G7 nations in the first quarter.

Article content

On food tariffs, the government said it is launching a “business engagement exercise” with a view to cutting levies and suspending tariffs on more than 100 types of products, including biscuits, chocolate and dried fruit and nuts. The full list of products will be published next week, the Treasury said.

Article content

“We’re trying to take off the pressure, just that little bit,” Lucy Rigby, one of Reeves’ Treasury ministers, told Sky News on Thursday. 

Article content

Article content

The Treasury has also been privately proposing voluntary price freezes on goods in supermarkets, though the suggestion has sparked a fierce backlash from retailers. Bank of England Governor Andrew Bailey called food price controls “not sustainable.”

Article content

Reeves has so far stopped short of announcing a wide-ranging energy bailout akin to the one delivered by the previous Conservative administration when Russia invaded Ukraine, arguing it would be unaffordable and calling for any intervention to be targeted. She is worried that such a package could backfire bbuy stoking inflation and destabilizing markets, and the Treasury’s internal analysis is that it would add about £600 ($807) a year to a new mortgage through higher borrowing costs, according to a person familiar with the matter, speaking on condition of anonymity.

Article content

The chancellor’s cost-of-living interventions to date have included freezing rail fares and prescription charges, lifting the minimum wage, and cutting household energy bills by shifting the costs of transitioning to green energy sources on to general taxation. The latter policy helped reduce the rate of inflation in the year to April.