Chancellor Reeves Warns Government Cannot Shield All From Iran War Price Hikes
Chancellor of the Exchequer Rachel Reeves has stated that the Government is actively preparing contingency plans to address the economic repercussions stemming from the ongoing conflict in the Middle East, specifically highlighting the crisis involving Iran. However, she indicated that there is no immediate prospect of Treasury assistance for motorists who are facing sharply rising fuel costs.
No Immediate Relief for Motorists as Fuel Costs Soar
In an interview with BBC Breakfast, Chancellor Reeves emphasized that the Government is "preparing for all eventualities" as the Iran war impacts the economy, driving up fuel and energy expenses for consumers nationwide. Despite this preparation, she made clear that hard-hit motorists should not expect swift financial aid from the Treasury to offset the soaring prices at petrol stations, which have escalated significantly since the crisis began on February 28.
Average diesel prices have surged to 182.8p per litre, marking a 40p increase, while petrol now stands at 152.8p per litre, up by 20p. Although fuel duty remains frozen until September, with the scheduled increase under review, other nations have already implemented tax cuts on petrol and diesel. Reeves cautioned that any blanket support measures could risk exacerbating inflation, interest rates, and government borrowing costs.
Targeted Support Expected in Autumn, Not Summer
Reeves suggested that a potential support package for energy bills is unlikely to be introduced until the autumn. She explained that most households are currently protected by the existing price cap until the end of June, and the subsequent cap will cover the summer months when gas consumption is typically lower. "From July to September, gas usage, especially by families and pensioners, is the lowest of any months of the year, because it is the summer months," she noted.
The Chancellor reiterated her commitment to avoiding a Liz Truss-style universal energy bailout, instead focusing on more targeted measures for the poorest households if necessary. She indicated that assistance may not be finalized until regulator Ofgem sets the price cap for October through December, with current predictions from Cornwall Insight forecasting a rise to £1,929 for a typical dual-fuel household from July to September—an 18% increase.
Economic Fallout and International Context
The economic disruption is largely attributed to Iran's effective closure of the Strait of Hormuz, a critical oil and gas shipping route, which has spiked oil prices and broader costs. Chancellor Reeves will meet with supermarket executives and regulators to discuss the impact on consumers, as the situation remains fluid.
The extent of the crisis could hinge on US President Donald Trump's strategy regarding the Strait of Hormuz. Trump has indicated a willingness to withdraw from the military campaign with Israel against Iran without ensuring the reopening of the maritime chokepoint, urging the UK and other non-participating countries to secure their own oil supplies. This stance has added complexity to the international response, with industry body Airlines UK denying Trump's claim that the UK faces jet fuel shortages ahead of the Easter bank holiday weekend.
Political Pressure and Future Actions
Ahead of Prime Minister Sir Keir Starmer's update from Downing Street on the Government's response to the cost-of-living squeeze, Reeves defended her approach, stating, "If I promised that I could alleviate every price increase for every person, I wouldn't be telling the truth, because all that you will be doing if you do that is pushing up inflation, interest rates and taxes in the future." She emphasized working on contingencies to step in responsibly without overspending.
Conservative shadow chancellor Sir Mel Stride has called for easing the cost of living, advocating for policies such as increased North Sea drilling, bill reductions, tax cuts, and economic strengthening. As the Government navigates these challenges, Reeves' focus remains on balanced fiscal management to mitigate long-term economic risks while addressing immediate consumer pressures.
