How UK Government Is Attempting To Address Cost Of Living Crisis

Labour has announced a raft of measures to help alleviate the soaring cost of living for Brits this week.

It comes as Donald Trump’s war against Iran, and the subsequent blockade of the Strait of Hormuz, continues to impact the global economy.

The waterway usually transports around 20% of the world’s oil and 25% of its liquefied national gas supplies, meaning its effective closure has hit energy-dependent countries everywhere.

A food security crisis is looming as a result, and the UK’s household energy price cap is expected to rise by £209 a year from July.

Here’s a look at the measures chancellor Rachel Reeves unveiled this week as part of her £300 million “Great British Summer Savings” scheme.

The government announced on Wednesday that it will keep the current 5p cut on fuel duty until the end of the year.

The reduced tax rate for petrol and diesel was meant to be phased out in September.

The policy was announced by the previous Conservative government to help ease the impact of the Russia’s invasion of Ukraine in 2022.

Now, with a fresh energy crisis emerging from the Middle East conflict, the government has decided to extend the scheme.

Red diesel duty will also be cut by one-third and road hauliers will receive a year’s grace on road tax to help the farming community.

A 12-month road tax holiday for HGVs and a 10p per mile in tax-free mileage rates, backdated to April 2026, is also set to be rolled out.

Children will travel for free on participating local buses in England for one month over the summer, Reeves announced on Wednesday.

The £100 million fare-free scheme will save a family with two children who make a weekly return trip at £1.50 per fare approximately £27, according to the government.

Those eligible can take an unlimited number of trips and do not need to register to enjoy the perk.

Similar schemes were successfully trialled in the West of England throughout the summer, Easter and Christmas holidays.

The chancellor announced a temporary cut to VAT on some attractions from 20% to 5% over the summer holidays.

“This will apply to ticket prices for both adults and children, covering attractions such as fairs, theme parks, zoos and museums,” Reeves told the Commons on Thursday.

“It will include children’s tickets for cinemas, concerts, soft play and the theatre, and it will cut the cost of children’s meals in restaurants and cafes from 20% VAT to 5% as well.

“These changes will apply across the UK from the start of the Scottish school holidays on 25th June, and run until the end of school holidays in England, Wales and Northern Ireland on the 1st of September.”

The chancellor announced plans to suspend tariffs on certain supermarket goods on Thursday.

Tariffs – import taxes on goods paid by companies in the supply chain – will be lifted on more than 100 types of products, including biscuits, chocolate, dried fruit and nuts.

Supermarkets will then have to pass that saving onto product prices so shoppers can enjoy a price cut.

The full list of products will be published next week but the scheme is expected to save consumers more than £150 million a year.

There were reports the government was going to force price caps to supermarkets to try to keep the price of essential products – like eggs, bread and milk – down.

However, even the idea of a voluntary scheme was dismissed by the supermarket sector.

Marks & Spencer’s chief executive, Stuart Machin, said the idea was “completely preposterous”.

There were fears that could lead to shortages on shelves and trigger pressure throughout the supply chain.

These measures might improve summer, but there is more pain around the corner.

While inflation did fall this week, it is expected to rise as the conflict in the Middle East triggered sky-high fuel prices.

The Office for National Statistics announced that Consumer Prices Index inflation fell to 2.8% in April, down from 3.3% in March, which is the lowest rate since March 2025.

However, that was driven by regulator Ofgem reducing the energy price cap from the start of April by £10 a month.

The energy price cap is expected to increase significantly from July, too, from the current rate of £1,641 per year to £1,850 for a typical dual fuel household, according to predictions.

But the chancellor will wait until September before finalising any package of targeted support for households in winter when energy use increases.

Ministers are also trying to avoid offering a universal bailout for all households so as not to drive up an increase in government borrowing costs and inflation, leading to the kind of economic disaster seen under Liz Truss.

The government insists it is offering “practical steps that help right now”.

Prime minister Keir Starmer said: “We know many hard‑working families are still feeling the squeeze and too often think they have to hold back.

“By giving every child free bus travel throughout August and cutting tariffs on everyday food items, we’re putting money back into people’s pockets and making life that bit easier.

“This government is focused on practical steps that help right now — easing pressure on household budgets, supporting parents during the school holidays, and backing British businesses.”

Subscribe to Commons People, the podcast that makes politics easy. Every week, Kevin Schofield and Kate Nicholson unpack the week’s biggest stories to keep you informed. Join us for straightforward analysis of what’s going on at Westminster.