Reeves Cost-of-Living Package Eases on Brent Fall; Gilt Yields Break Below 5%
Chancellor Rachel Reeves’s cost-of-living package — cancellation of the 5p fuel-duty rise, free bus travel for children over the summer holiday, VAT cuts on summer attractions, removal of import tariffs from 100 food items, and a £120 million ceramics support package — is landing into a measurably easier macro backdrop. Brent crude has fallen 7% on the week to $93.80; the 10-year gilt yield broke below 5% on Friday for the first time since 13 May. One Labour MP close to Reeves: “The biggest fear for the bond markets and the unions is Ed Miliband.” Friends of Reeves believe there is a world in which she survives a Burnham premiership.
The 5p fuel-duty extension cancellation is locked until 31 December 2026. Inflation has slowed to 2.8% — the lowest in over a year. The Bank of England Monetary Policy Committee is widely expected to keep interest rates on a downward path. The 4.98% close on the 10-year gilt is the lowest since 5 May; the post-mini-Budget 2026 peak was 5.18% on 13 May. The October Ofgem price-cap reset is now likely to absorb a meaningful share of the July 13% hike if Brent stays in the $80-95 range through mid-summer. A signed Iran deal would compound the inflation-easing dynamic and give the Treasury fiscal headroom to absorb the cost-of-living package without breaching the fiscal rules.