The Institute for Public Policy Research (IPPR) has called on the British government to lower speed limits as part of a package to mitigate the economic impact of the Iran conflict on consumers. The thinktank proposes capping speeds at 20mph in towns and cities and 60mph on motorways to reduce fuel demand and combat rising oil prices.
In addition to speed reductions, the IPPR recommends a temporary 10p cut in fuel duty and 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%. Senior economist William Ellis stated that the UK cannot afford another energy shock and that the economy and public finances will take a significant hit from the conflict.
The thinktank describes lower speeds as a "dual win," lowering fuel demand while making streets safer for walking and cycling. However, such measures may prove controversial. Wales reduced its default speed limit to 20mph in 2023, and a BBC poll this year found over half of respondents opposed it, despite a more than 10% fall in road casualties.
The IPPR estimates that the Treasury could lose up to £8bn annually from higher debt payments and lower tax revenues without a support package. The proposed fuel duty cut would apply until spring 2027, and the price cap would trigger automatically if Ofgem's quarterly estimates exceed £1,641. Gas and electricity bills could reach almost £2,000 per year from July.
The researchers said the policies would cost up to £5bn a year, far less than Liz Truss's £76bn response to the 2022 energy crisis. The package could reduce peak inflation by up to two percentage points and potentially avert the need for the Bank of England to raise interest rates. The Bank left rates at 3.75% last week but warned of possible increases later this year.
