Reeves to promise free summer bus rides for children and food tariff cuts in living costs package | Economics

Rachel Reeves will promise free summer bus rides for children and cut tariffs on some food imports as part of a package of measures aimed at easing the costs of the Iran conflict.

The Chancellor will make a statement to the House of Commons on Thursday and outline his latest plans to cushion the blow to consumers from an expected rise in inflation later this year.

The offer of free bus travel to children aged 15 and under throughout August will form part of what he calls a “Great British summer savings plan”.

Before the speech, Reeves said: “My number one priority is protecting households from rising costs. I want every family to be able to have fun this summer, which is why we’re launching the UK summer savings scheme and why we’re helping children with free bus travel throughout August.”

It comes after Keir Starmer announced that the government will postpone fuel tax increases planned to come into effect in September and December and will give free vehicle tax to truck drivers.

Speaking to the prime minister’s questions on Wednesday, Starmer said: “We’re giving our hauliers a 12-month vehicle duty holiday, helping to keep prices low and supporting drivers by extending the fuel duty freeze for the rest of the year.” The tax on red diesel used by farmers will also be reduced by one third.

The fuel tax decision was criticized by think tanks, including the Resolution Foundation, and it was pointed out that high-income households would benefit from the decision the most.

Jonathan Marshall, the group’s chief economist, said: “By autumn, low-income families, who are still £1,800 poorer than before the last energy price shock, will be hit hardest by rising food prices and energy bills. But the support announced today will benefit the better off first, with the richest fifth of households earning twice as much as the poorest fifth.”

The cost of the package to motorists, including a deferral of the 5p increase and a discount on red diesel, is expected to be around £400 million, and the chancellor will announce more details of how it will be financed on Thursday, the Treasury said.

The Treasury did not clarify whether the full 5p increase would be expected to continue in January, saying the timing of any future moves would be announced in the autumn budget.

Reeves will also outline plans to remove tariffs on imports of a range of foods, including biscuits, chocolate and dried fruit, in the hope of lowering prices for consumers. Treasury details will be consulted.

A more ambitious plan to persuade supermarkets to reveal the cheap prices set for basic foods has collapsed after it was widely criticized by retailers, with the boss of Marks & Spencer describing it as “utter nonsense”.

The Treasury had hoped to announce a voluntary agreement on reduced prices on staples such as eggs and milk in exchange for the government removing additional burdens on retailers, such as new packaging regulations.

M&S chief executive Stuart Machin said: “I don’t think the government should try to run the business. They should try to understand the business better. The government has a lot in its control. My advice is to try to reduce the tax and regulatory burden and free us up in a very competitive market.”

Reeves’ hopes for an economic recovery, evidenced by strong data for the first quarter of the year, have been dashed by the Iran conflict, which is expected to slow growth and push up inflation.

Yet with Andy Burnham hoping to challenge Starmer for the Labor leadership if he wins next month’s Makerfield by-election, the chancellor is keen to make clear his claim that he has the “right plan” for the economy.

His team said inflation in the UK fell to 2.8% in April despite rising fuel prices as a result of the closure of the Strait of Hormuz due to measures taken by Reeves in the budget to reduce household energy bills.

He is expected to give more information on Thursday about how he will approach the problem of rising electricity bills this winter. Treasury sources emphasized that it is still unclear how dramatically the bills will increase, and that this will depend on when the strait will be reopened to maritime traffic.

Reeves has repeatedly made clear that he will not offer a sweeping rescue package, as Liz Truss did in 2022, when the Ukraine conflict was driving up energy costs and household bills.