Rachel Reeves’ 2024 Budget has ignited a hellstorm of debate over whether it will drive inflation. Tory leader Kemi Badenoch is blaming the Chancellor for making it worse with her “tax and spend choices.” Overall, the government’s recent financial proposals directly address some of the most pressing economic issues. According to opposition leaders, these regulatory measures aren’t the answer, potentially resulting in higher inflation.
In her budget announcement, Reeves reversed course on the 5p cut in fuel duty, extending it until next September. Today’s decision takes an important step toward relieving financial pressure on consumers. Unlike other environmental reviews, this decision was skeptical from the outset. Badenoch is right that these policies will push inflation up even further. She suggests they’re “fueled by her tax and spend choices.”
Beginning in April of 2028, there will be a major adjustment for people driving electric and plug-in hybrid vehicles. Electric vehicle motorists will be charged 3p per mile on a national roads base. Plug-in hybrid drivers will be exempted with a lower fee of 1.5p per mile. These rates will automatically go up annually to keep pace with inflation. For one, vehicle owners are concerned about long-term costs associated with these new fees.
On a more positive note, the government has announced a freeze on rail fares until March 2027, marking the first such freeze in decades. This measure is an extension of Reeves’ big-picture approach to combat increasing costs for consumers. Clare Lombardelli, who addressed the Commons’ Treasury committee, emphasized that capping fuel duty, cutting energy prices, and freezing rail fares will help contain price increases.
“Capping fuel duty, cutting energy prices, and freezing rail fares will bear down on price increases.” – Clare Lombardelli
At present, the UK is experiencing a record high inflation rate of 3.5%. The Office for Budget Responsibility (OBR) has predicted inflation will fall to 2.5% next year. Looking further ahead, inflation is expected to drop back down to the Bank of England’s 2% target by 2027. While Reeves’ measures are expected to have a “short-term” impact, adding 0.2% to GDP in 2027, their effectiveness in curbing inflation remains uncertain.
The mixed reception to these budgetary measures reflects a broader concern about the balance between fiscal policy and economic stability. As debates continue over the implications of Reeves’ budget, stakeholders across the political spectrum are closely monitoring its effects on inflation and overall economic growth.