Rachel Reeves will hike taxes on working people or increase borrowing to address the « significant » economic impact of the Iran war, it has been suggested. Shadow Chancellor Mel Stride warned that Ms Reeves has left herself with « very little room for manoeuvre » to fix Britain’s « fragile » economy in the wake of the Middle East conflict. It comes as oil and gas prices rocket amid Iran’s ongoing stranglehold on the Strait of Hormuz, a major global shipping route.
Mr Stride said: « The way this government operates whenever there’s a squeeze on its fiscal position or a requirement to step in and help out in some way, is it turns either to borrowing or to taxing people even more. I fear that what the Chancellor is going to be doing is coming back for yet more tax or increasing borrowing at a time when she’s created a very fragile economy, a very high level of debt that, I’m afraid, isn’t going to really be able to provide much firepower when it comes to helping people out. »
He argued that the Government should instead be controlling spending, including by « getting the welfare bill down, getting people off benefits and into work ».
Oil prices have soared to as much as $120 a barrel in response to the Iran conflict, costing UK drivers more than £300 million in more expensive fuel, according to analysis by the RAC Foundation.
The Chancellor warned that economic challenges from the war may be « significant » on Tuesday, pledging to offer energy bill support for « those who need it most ».
She told MPs: « Contingency planning is taking place for every eventuality so that we can keep costs down for everyone and provide support for those who need it most, acting within our iron-clad fiscal rules to keep inflation and interest rates as low as possible. »
« This is not a war that we started, nor is it a war that we joined … but it is a war that will have an impact on our country, » she added.
« The challenges may be significant but I promise to do what is right and fair, being responsive in a changing world and responsible in the national interest. »
Conservative leader Kemi Badenoch said scrapping taxes on energy bills would be « much better » than offering targeted support in shielding UK homes from the expected cost hikes.
Ms Reeves announced plans to increase fuel duty by another 5p, starting with a penny in September. Ms Badenoch said: « It’s completely crazy to be increasing fuel duty at this time, and let’s drill our own oil and gas in the North Sea. »
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