Chancellor Rachel Reeves is set to unveil a package of measures aimed at easing the financial burden on households, including free summer bus rides for children and tariff reductions on certain food imports. The announcement, part of what she calls the 'Great British summer savings scheme,' comes as the government seeks to mitigate the economic impact of the Iran conflict.
Free Bus Travel for Children
Reeves will promise free bus travel for children aged 15 and under throughout August. This initiative forms a key component of the savings scheme, designed to help families enjoy the summer despite rising costs. The Chancellor stated: 'My number one priority is protecting households from rising costs. This summer I want every family to be able to enjoy themselves, that’s why we’re launching the Great British summer savings scheme, and why we’re helping kids with free bus travel throughout August.'
Fuel Duty Postponement
Prime Minister Keir Starmer has already announced the postponement of planned fuel duty increases that were due in September and December. Additionally, lorry drivers will receive a 12-month vehicle tax holiday. Starmer confirmed: 'We are giving our hauliers a 12-month vehicle tax holiday, helping to keep prices down, and we are backing drivers by extending the freeze in fuel duty for the rest of the year.' The duty on red diesel used by farmers will also be cut by a third.
However, the decision has faced criticism from thinktanks like the Resolution Foundation. Jonathan Marshall, its principal economist, argued: '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. And yet the support announced today will primarily benefit those who are better off, with the richest fifth of households gaining more than twice as much as the poorest fifth.'
Cost and Funding
The Treasury estimates the cost of the motorist package, including postponing the 5p rise and the red diesel discount, at approximately £400 million. Reeves will provide further details on funding in her Thursday statement. The full 5p increase may still go ahead in January, with timing to be confirmed in the autumn budget.
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 specifics. This follows the abandonment of a more ambitious plan to persuade supermarkets to set fixed low prices for basic foods, which faced widespread criticism from retailers. M&S chief executive Stuart Machin called the price cap idea 'completely preposterous,' adding: 'I don’t think government should be trying to run business. They should try to understand business better. ... My advice is to try to reduce tax and regulatory burden and free us up in a very competitive market.'
Economic Context
The Chancellor's plans come amid economic challenges posed by the Iran conflict, which is expected to slow growth and increase inflation. Despite strong first-quarter data, Reeves acknowledges the headwinds. With Andy Burnham potentially challenging Starmer for Labour leadership after the Makerfield byelection, Reeves is keen to demonstrate her economic competence. Her team notes that UK inflation fell to 2.8% in April, partly due to previous budget measures reducing household energy bills.
Reeves is expected to address rising utility bills this winter, though Treasury sources stress uncertainty about the scale of increases, which depend on when the Strait of Hormuz reopens. The Chancellor has ruled out a broad rescue package similar to Liz Truss's approach in 2022 during the Ukraine conflict.
