The Institute for Public Policy Research (IPPR) has called on the British government to reduce speed limits as part of a broader strategy to mitigate the economic impact of the Iran war on consumers. The thinktank proposes capping speeds at 20mph in towns and cities and 60mph on motorways to cut fuel demand and counteract soaring oil prices triggered by the conflict.
Proposed Measures
In addition to speed reductions, the IPPR recommends a temporary 10p cut in fuel duty and the introduction of a new energy price cap of £2,000 per year to support households. The institute warns that without intervention, inflation could peak at 5.8%, further straining the economy.
William Ellis, senior economist at the IPPR, stated: "The UK cannot afford to sit back and let another energy shock drive up inflation and damage the economy. The UK economy and public finances are expected to take a significant hit from the Iran conflict, regardless of whether the government intervenes."
Dual Benefits of Lower Speeds
The thinktank describes lower speed limits as a "dual win," reducing fuel demand while making streets safer for walking and cycling. The IPPR suggests packaging this with advice on efficient driving, increased home working, and carpooling.
However, such measures may prove controversial. Wales implemented a default 20mph speed limit in 2023, and a BBC poll this year found that over half of Welsh residents opposed it, despite a more than 10% reduction in road casualties within 18 months.
International Context
The International Energy Agency has already advised member countries, including the UK, to consider lowering speed limits and restricting car use as part of emergency measures akin to those seen during the Covid-19 pandemic, in response to the Middle East conflict.
The IPPR estimates that without a support package, the Treasury could lose up to £8 billion annually due to higher debt payments and lower tax revenues from reduced economic growth.
Cost and Effectiveness
The proposed fuel duty cut would remain in effect until spring 2027, while the price cap would sit above the current Ofgem quarterly cap of £1,641 but would activate automatically if quarterly estimates exceed that threshold. Average household gas and electricity bills could reach nearly £2,000 per year from July.
Researchers note that the policies would cost up to £5 billion annually, a fraction of the £76 billion spent on Liz Truss's response to the 2022 energy crisis. Chancellor Rachel Reeves has indicated that any support this year will target those most in need.
The IPPR estimates that the measures could reduce peak inflation by up to two percentage points and potentially avert the need for the Bank of England to raise interest rates, a move many analysts expect later this year. The Bank left rates unchanged at 3.75% last week but warned of possible increases ahead. Governor Andrew Bailey commented: "The longer this problem goes on and the longer the disruption to energy supplies goes on, the more difficult the scenario we're in."
Ellis concluded: "The government can act now where the Bank can't, with a well-designed policy that acts to cap prices only in the most damaging scenarios. At worst, this would save about as much as it costs – but if permanent damage or sharp interest rate rises are avoided, this could end up saving money."
