Reeves Cost-of-Living Fiscal Headroom Eases as Brent Pulls Back to $96.80; Gilt Yields at 5.03%
Chancellor Rachel Reeves’s cost-of-living package faces a partially eased Tuesday-close macro backdrop as Brent crude pulled back to $96.80 on the Iran-Israel pause and gilt yields eased to 5.03%. Friends of Reeves believe there is a world in which she survives a Burnham premiership; the Friday MP lobbying for Reeves-continuity makes that scenario more credible but the structural war-risk premium continues. 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.
The 5p fuel-duty extension cancellation is locked until 31 December 2026. Inflation has slowed to 2.8% — the lowest in over a year — but Brent staying in the $95-100 range will start to reverse the inflation-easing path through the second half of 2026. The October Ofgem price-cap reset depends on Brent staying in the $88-95 range through mid-summer; the current trajectory still points to a meaningful price-cap rise rather than a roll-back. The Bank of England MPC’s next decision later this month is the binding macro variable. The Treasury’s fiscal-headroom calculation eases marginally with the gilt-yield easing to 5.03% but remains structurally tight.