Chancellor Rachel Reeves is under mounting pressure to assist motorists as the Treasury reportedly gains an £8 billion windfall from soaring energy prices. Despite fuel costs reaching £1.80 per litre for diesel and £1.52 for petrol, Reeves has refused to cut fuel duty, unlike Australia, Spain, and Poland. The Treasury is estimated to receive an extra £20 million daily from higher VAT on fuel, the North Sea profits levy, and excess profit taxes on power generators.
Prime Minister Sir Keir Starmer is holding another Cobra emergency meeting to address the economic impact of the Iran crisis, which has disrupted oil supplies through the Strait of Hormuz. The Tories have criticised the government for holding talks instead of taking action. Kemi Badenoch urged Starmer to drop the 'bonkers' ban on new North Sea drilling, stating the oil and gas sector has already outlined its needs.
Treasury Chief Secretary James Murray defended the government's approach, noting that energy bills are expected to fall over the next three months. He cautioned that the analysis of a tax windfall may be misleading, as higher VAT on energy could reduce overall revenue if consumers spend less on other goods. The government is monitoring the situation and making contingency plans, but immediate bailouts are unlikely and would target benefits claimants rather than middle-income households.
The International Monetary Fund warned that the conflict is 'reviving the spectre of the 2021-2022 gas crisis', with the UK and Italy particularly exposed due to their reliance on gas-fired power. Former Maersk director Lars Jensen cautioned that the crisis could surpass the energy shocks of the 1970s, which triggered a global recession. Energy analysts have suggested measures such as lowering motorway speed limits and suspending domestic flights, but Downing Street has downplayed the need for immediate action, stating the UK remains well supplied.
