Reeves Cost-of-Living Package Carries Forward on IMF Growth Upgrade and Easier Fiscal Backdrop
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 — carries into the weekend on a measurably easier macro backdrop. The IMF urged the UK to “stay the course” on borrowing earlier this month, upgrading UK growth forecasts and praising Reeves for aiming to cut the budget deficit. Brent crude is down 7% on the week to $93.80; the 10-year gilt yield is below 5% for the first time since 13 May. Friends of Reeves believe there is a world in which she survives the transition to 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 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. One Labour MP close to Reeves: “The biggest fear for the bond markets and the unions is Ed Miliband.” Burnham’s allies have floated Energy Secretary Ed Miliband as his potential chancellor; Reeves’s allies counter that Miliband “would not be trusted by the bond markets”.