Chancellor Reeves Keeps All Options Open on Energy Support Amid Iran Conflict
Chancellor Rachel Reeves has firmly stated that "nothing is off the table" when it comes to providing support for consumers grappling with escalating energy costs, as tensions in the Middle East continue to drive up oil prices. In a session with the Treasury select committee, Reeves did not rule out abandoning a planned fuel duty increase scheduled for September, emphasizing that the government is actively exploring both targeted support and broader measures to alleviate financial pressures on households.
Volatile Energy Markets and Contingency Planning
Against a backdrop of volatile energy markets exacerbated by the US-Israel conflict with Iran, Reeves highlighted the government's dual focus: de-escalating the regional conflict and ensuring the safe passage of oil and gas exports through the critical Strait of Hormuz. She noted that Britain is prepared to collaborate with other members of the International Energy Agency to release strategic oil reserves, aiming to curb the surge in crude prices that has seen barrels briefly reach $119.50—levels not witnessed since 2022.
However, Reeves cautioned that it remains "too early" to determine if emergency assistance is necessary, as the Treasury develops contingency plans for an energy support package. "We are looking at targeted support as well as broader measures, but it is just too early to say what is needed," she told MPs, underscoring the uncertainty surrounding future petrol prices and the broader economic impact.
Fuel Duty and Political Pressure
When pressed by Conservative MPs on whether she would scrap the planned fuel duty increase—set to phase out a 5p cut implemented after Russia's invasion of Ukraine—Reeves maintained that all tax options are under review. "We always keep all taxes under review. But it is much too early when those changes are not due to come into effect until September to guess where petrol prices will be then," she explained. This stance comes amid mounting pressure from opposition parties, including the Tories, Reform UK, and the Liberal Democrats, who are urging the chancellor to cancel the rise to prevent further strain on consumers.
Prime Minister Keir Starmer echoed this cautious approach in the Commons, stating that fuel duty is frozen until September and will be reassessed in light of developments in Iran. The political scrutiny intensifies as fuel prices at filling stations climb sharply, driven by fears that Middle East disruptions could push wholesale prices to record highs.
Market Competition and Fiscal Constraints
Reeves emphasized the importance of fostering a competitive market over government subsidies, announcing a meeting with industry leaders and the Competition and Markets Authority to address profiteering by fuel retailers. "I am very loth to spend government money on something the market should be doing itself. And that is why greater competition and greater transparency about pricing is so important," she asserted, advocating for better consumer information on petrol forecourt prices.
Despite the Office for Budget Responsibility warning that UK inflation could end the year at 3%—higher than previously expected due to the Iran conflict—and that fiscal rules might limit emergency support, Reeves insisted there is "scope for interventions in the short-term." She pointed to reduced borrowing and debt levels, along with investments in green energy, as factors that have bolstered Britain's resilience to global oil and gas price fluctuations. "Over the next few years we will be even more insulated as more of that renewable energy comes online and as we build the infrastructure to better connect it to the grid," she added, highlighting a long-term strategy to mitigate energy cost volatility.
