Rachel Reeves has announced a package of summer cost-of-living measures to help families cope with the economic effects of the Iran conflict.
The chancellor told MPs that the Government would fund free bus travel for children aged 5 to 15 in England throughout August, alongside temporary VAT cuts on selected days out and children’s meals. The measures form part of the Government’s Great British summer savings scheme, which is designed to reduce pressure on household budgets during the school holidays.
Under the plan, children in England will be able to use participating local buses for free throughout August, with unlimited journeys and no registration required. The Treasury has committed more than £100m to the fares scheme, while continuing to support bus services.
The Government also confirmed a temporary VAT cut from 20% to 5% on eligible summer activities. The reduced rate will apply from 25 June to 1 September 2026 and will cover children’s meals in restaurants, children’s and family tickets for cinemas, theatres, concerts, shows and exhibitions, as well as admission to attractions including zoos, museums, theme parks, soft play centres, adventure parks and wildlife parks.
Food tariffs and fuel duty
Reeves also confirmed targeted cuts to import tariffs on some food products, including biscuits, chocolate, dried fruit, and nuts, to ease pressure on food prices. She said supermarkets were expected to pass those savings on to customers.
The food tariff announcement followed the Government’s decision to delay planned fuel duty increases that had been due to take effect later in the year. Ministers also announced support for hauliers and drivers, including a 12-month vehicle tax holiday for lorry drivers and a cut to duty on red diesel used by farmers.
The Treasury said the wider package was intended to help keep prices down as higher energy and transport costs feed into the economy. However, critics argued that some parts of the support, particularly fuel duty relief, would benefit higher-income households more than lower-income households.
A previous Treasury plan to ask supermarkets to commit to fixed low prices on basic goods was dropped after strong criticism from retailers. The Government had explored a voluntary deal on staples such as eggs and milk, in exchange for easing some regulatory costs on retailers.
A targeted approach
Reeves said the summer savings scheme would cost about £300m. The Government said the package would be partly funded by reforms to the foreign branches exemption, a tax rule that allows companies to offset overseas losses. Ministers said the changes would stop some multinationals using complex structures to reduce the tax they pay in the UK.
The chancellor also announced support for energy-intensive industries, including funding for chemicals and ceramics businesses, as firms continue to face higher costs linked to the conflict. Reuters reported that Reeves also said the Government was working on possible temporary support for businesses if energy market conditions worsen later this year.
Reeves has resisted calls for a broad rescue package similar to the support introduced during the energy price shock after Russia’s invasion of Ukraine. Instead, she has framed the latest measures as temporary and targeted, with further decisions on winter bills expected once there is more clarity over energy prices.
The package gives families some short-term help over the summer, but pressure remains. Food prices, energy bills and transport costs are still expected to weigh on household finances, while businesses in hospitality, retail and manufacturing continue to warn that rising costs are affecting confidence, hiring and investment.
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