Chancellor Rachel Reeves is set to announce a package of measures aimed at easing the financial burden on households during the summer, including free bus rides for children and cuts to tariffs on certain food imports. The initiative, dubbed the 'Great British summer savings scheme,' comes as the government seeks to mitigate the economic impact of the Iran conflict, which is expected to drive up inflation later this year.
Free Bus Travel for Children
As part of the scheme, children aged 15 and under will be able to travel on buses for free throughout August. Reeves emphasized her commitment to protecting families from rising costs, stating, 'My number one priority is protecting households from rising costs. This summer I want every family to be able to enjoy themselves.'
Fuel Duty Freeze Extended
The announcement follows Prime Minister Keir Starmer's decision to postpone planned fuel duty increases scheduled for September and December. Additionally, lorry drivers will receive a 12-month vehicle tax holiday. Starmer also announced a one-third cut in duty on red diesel used by farmers. The Treasury estimates the cost of these measures for motorists at around £400 million.
Criticism from Thinktanks
The fuel duty freeze has drawn criticism from the Resolution Foundation, which argues that high-income households will benefit the most. Principal economist Jonathan Marshall noted, '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.' He added that the announced support primarily benefits the better-off, with the richest fifth of households gaining more than twice as much as the poorest fifth.
Food Tariff Cuts
Reeves will also outline plans to remove tariffs on imports of certain foods, including biscuits, chocolates, and dried fruits, aiming to lower consumer prices. The Treasury will consult on the details of this proposal. However, a more ambitious plan to persuade supermarkets to set fixed low prices for basic foods has been abandoned after widespread criticism from retailers. M&S chief executive Stuart Machin called the idea 'completely preposterous,' stating, 'I don't think government should be trying to run business.'
Economic Context
Reeves's hopes for an economic upturn, supported by strong first-quarter data, have been dampened by the Iran conflict, which is expected to slow growth and push up inflation. Despite this, with Andy Burnham potentially challenging Starmer for the Labour leadership, Reeves is keen to argue that she has 'the right plan' for the economy. Her team highlighted that UK inflation fell to 2.8% in April, partly due to budget measures reducing household energy bills.
Looking Ahead
Reeves is expected to address the challenge of rising utility bills this winter, though Treasury sources stress that the extent of bill increases remains unclear, depending on when the Strait of Hormuz reopens to marine traffic. Reeves has ruled out an across-the-board rescue package similar to Liz Truss's 2022 response to the Ukraine conflict.
