Middle East: Economic Response

We have the right economic plan, but the conflict in the middle east poses a significant challenge to the world’s economy, including our own. I have not shied away from my criticism of the war; I believe it to have been a mistake. Nor have I ignored the costs that it will bring to bear on the British people. I have been clear-eyed about my duty to do what I can to support families and businesses; to be responsive to a changing world, and responsible in the national interest.

Next week, Ofgem will confirm the level of the energy price cap that will apply from July. I know that any increase will be felt by families. Because of the decision I made in last year’s Budget to cut £150 from energy bills, we have lessened the impact of rising prices, and current external forecasts suggest that the cap from July will be at a similar level to the cap in April last year. We stand ready to act if market conditions worsen significantly later this year, and I have been leading cross-Government contingency work on the design of potential future targeted and temporary support.

For businesses, any support will also need to be carefully targeted at the firms most exposed to the crisis, but although many firms have been insulated from recent price rises through fixed-price contracts, there are sectors that face particular structural issues related to energy costs. That is why we have already increased support for our most energy-intensive industries through the British industry competitiveness scheme, which we have brought forward. It is also why we have built resilience in our critical infrastructure and industrial strategy sectors, where supply chains are critical for growth and security.

Following representations from my right hon. Friend the Member for Redcar (Anna Turley) and my hon. Friends the Members for Mid Cheshire (Andrew Cooper) and for Bathgate and Linlithgow (Kirsteen Sullivan), and building on the good work of the Minister for Industry, my hon. Friend the Member for Stockton North (Chris McDonald), I am today establishing a £350 million critical chemicals resilience fund to support strategically important producers. Having listened to hon. Friends, including my hon. Friends the Members for Stoke-on-Trent Central (Gareth Snell), for Stoke-on-Trent North (David Williams), for Stoke-on-Trent South (Dr Gardner) and for Amber Valley (Linsey Farnsworth), as well as workers represented by the GMB union, I am today announcing a new £120 million fund to help our historic ceramics sector, helping it to increase efficiency and drive down energy costs. We will always stand up for British industry and British jobs.

This week, the Government have also set out additional, targeted support for those businesses most exposed to rising fuel costs. We are granting hauliers a 12-month road tax holiday for heavy goods vehicles, saving the typical heavy lorry up to £912. To support farmers and the rail freight industry, I have decided to cut duty on red diesel by over a third until the end of this year, and having heard from my hon. Friend the Member for Oldham West, Chadderton and Royton (Jim McMahon) and the trade union Unison, I can today announce a 10p per mile increase in tax-free mileage rates, backdated to April 2026. This will benefit those who need to drive for work, from care workers to plumbers.

When a country faces challenges because of higher oil and gas prices, we must ensure that those who benefit from increased prices and volatility pay their fair share. In my first Budget, I extended and increased the energy profits levy. Last year, I announced a new permanent windfall tax regime on oil and gas prices. Last month, I increased the electricity generator levy, alongside further action to weaken the link between high gas prices and electricity prices. Today, I am bringing forward specific changes to the taxation of foreign branch profits, changing how companies are taxed in relation to their overseas activities. Currently, some oil and gas groups that operate overseas through foreign branches have structured their tax affairs in a way that ensures they pay little or no corporation tax on their UK energy trading profits. Today, we are putting an end to that practice. We expect these reforms to raise hundreds of millions of pounds a year and fund the package of measures set out today, with costings certified by the OBR forecast in the usual way.

I know the pressure that family finances are under, which is why I have already taken action to provide help. I have increased the national living wage and the national minimum wage to their highest rates ever, frozen prescription charges for two years in a row, and frozen rail fares for the first time in 30 years. I have also taken £150 off energy bills, which contributed to last month’s fall in inflation. However, I want to go further, and today I am taking further action to ease the burden on family finances.

First, on fuel duty, I have already extended the 5p cut twice since the election. I can confirm today that there will be no rise in fuel duty this year, recognising the pressure that the war has put on fuel prices.

Secondly, I know that the cost of the weekly shop is often one of the biggest worries for families, so last month I met supermarkets to urge them to do all they can to keep prices low. Today I am taking action by suspending tariffs on over 100 different foods sold in supermarkets. I am clear that I expect supermarkets to pass those savings on in full to their customers.

Thirdly, I will not tolerate any company exploiting the current situation to make excess profits at consumers’ expense. As such, I am bringing forward tough new powers so that the Competition and Markets Authority and other regulators can take action when firms break the rules.

Fourthly, for many families, driving is not always an option. Buses are the most popular form of public transport in Britain, with over 4 billion journeys made last year. I have already extended the £3 bus fare cap to March 2027, and today I can confirm that bus travel across England will be free for children aged between five and 15 throughout August.

Finally, I recognise that what matters for families is not just getting by, but being able to enjoy time together without worrying about the next bill. That is why I am launching the great British summer savings scheme, to help families and to support our hospitality sector. I can today announce a temporary cut in the rate of VAT on summer 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. It will include children’s tickets for cinemas, concerts, soft play and the theatre, and it will also cut the cost of children’s meals in restaurants and cafés from 20% VAT to 5%. These changes will apply across the UK from the start of the Scottish school holidays on 25 June and will run until the end of the school holidays in England, Wales and Northern Ireland on 1 September.

This Government have the right economic plan. We promised to grow the economy, and we have. We promised to cut inflation, and we have. We promised to cut the cost of living, and we are—promises made by a Labour Government, promises delivered by a Labour Government. I commend this statement to the House.

This is exactly the same game that the Government played last year when they U-turned on cuts to the winter fuel payment. They claimed then that they were U-turning because the economy was improving when, of course, they were doing it due to political pressure. Nobody bought it then and nobody is buying it now. Once again, we have a weak Government caving in to the inevitable after spending months defending a truly terrible decision.

The Chancellor claims that the measures announced today will be funded by a number of different tax measures, but most of the ones she mentions are already in place and baked into the OBR’s forecasts. Given that the Chancellor has not announced any measures to control Government spending, will she confirm that, in fact, the measures that she is announcing today will be funded, at least in part, by yet more Government borrowing? Will she also confirm whether fuel duty rates will still rise to the same level as previously planned after December, or will today’s announcement mean a permanent reduction in fuel duty?

Although we in the Opposition welcome some of the measures that the Chancellor has taken today, such as the increase in mileage allowances, it is all very minor compared with the inflation this Government have fuelled since coming into office and the tax rises that the Chancellor has imposed. Today’s announcements will bring little comfort to the hundreds of thousands of people who have lost their jobs, the countless businesses that have folded and the high streets that are now hollowed out. The reality is that we are in a terrible position to deal with the consequences of the latest energy crisis, thanks to the actions that this Government have taken.

The Chancellor claimed that growth is up; it is actually down. She claimed that borrowing is down; it is 75% up compared with the plans that she inherited. She claimed that she is fighting inflation; we have the highest inflation in the G7. She claimed that she is cutting energy bills; energy bills have gone up under this Labour Government. And of course, she did not mention unemployment.

On energy, this Government have made a conscious decision not to exploit our own natural resources in the North sea, weakening our economy and our energy security while importing oil from Putin’s Russia at the cost of Ukrainian lives. Families and businesses are facing rising costs and rising taxes. People are losing their jobs. The country is hurting. If the Chancellor were serious about the challenges we face, she would commit to getting spending down, tackling the benefits bill and getting taxes down to strengthen our economy. Yet thanks to the Chancellor’s mistakes and the weakness of this dying Government, today’s statement is all we get. Does the Chancellor really think that that is enough?

The shadow Chancellor talks about inflation and growth. Yesterday, the numbers showed that inflation had fallen; we are the only country in the G7 where inflation fell last month. The IMF has revised up our growth forecast and we had the fastest growth of the G7 in the first quarter of this year. The shadow Chancellor asks whether that will be paid for with new borrowing. No, it will not. If he had been listening, he would have heard the changes we are making around the foreign branch exemption. That will raise hundreds of millions of pounds a year, which is why we are able to afford the package that we have announced today.

The shadow Chancellor mentioned high streets. Because of the Pride in Place money that I announced at the Budget, the banking hubs and the changes that we made to business rates, which have seen those rates for retail and hospitality come down significantly compared with the plans we inherited from the Conservative Government, we can reinvigorate our high streets.

The shadow Chancellor mentioned borrowing. Borrowing has fallen below 5% for the first time since 2019 because of the actions that I have taken as Chancellor. Borrowing is expected to fall in every year of this Parliament—very different from what happened under the Conservatives. Employment and activity remain in the top half of the OECD and the G7. The biggest benefits boom came under the last Conservative Government, when the shadow Chancellor was the Work and Pensions Secretary.

Oil and gas will play an important role in our economy for many years to come, but we also need to invest in renewable energy, which is why we announced yesterday restrictions in the number of judicial reviews, which are holding up investment in clean energy. It is a shame that the Conservatives voted against our Planning and Infrastructure Act 2025 and it is a shame that the Liberal Democrats abstained on it. We are determined to get Britain building, including building the energy infrastructure we need to get bills down.

Just a couple of weeks ago, I announced changes around tie-backs to make it easier for oil and gas companies to exploit their reserves of oil and gas in the North sea. Jackdaw and Rosebank would have gone ahead if it had not been for the last Government messing up the way they legislated. We will shortly announce the decisions, which the Secretary of State for Energy and Net Zero will make. I am very clear that oil and gas will play an important role in the UK for many years to come, adding to our energy security alongside investment in nuclear, small modular reactors, floating offshore wind and onshore wind and solar, opposed by the Conservative party.