Reeves Cost-of-Living Package Heads Into Monday on Easier Macro and IMF Backing
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 — heads into the Monday political-economy environment on the IMF’s May urging to “stay the course” on borrowing and an upgraded UK growth forecast. 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 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”.