Rachel Reeves said she is ‘angry’ with Donald Trump over the Iran War today as she put Britain on red alert for a recession.
The Chancellor delivered the most direct criticism yet of the US President as she warned his ‘choice’ meant ‘real hardship’ to come.
She said ‘implications’ for the UK would include a squeeze on economic growth – which is already effectively flatlining.
Ms Reeves also dismissed the idea she could use a ‘windfall’ from higher oil and gas prices to help drivers at the pumps, arguing the that rising debt interest costs and pulled investment would more than offset the gain.
She has again insisted that any energy bailouts will not go to the ‘wealthy’, and decisions are unlikely to be taken until later in the year. That has led to anger that middle-income earners are being forced to subsidise those on benefits.
Chaos in the Middle East has sent pump prices soaring to their highest levels in years, with diesel the worst hit.
Fears of fuel shortages are mounting as Iran maintains a blockade on the Strait of Hormuz and Donald Trump swings wildly between saying the war will end soon and threatening escalation.
Appearing on BBC Radio 2 this afternoon, Ms Reeves said ‘the idea that there’s any windfall coming to the Treasury, that’s just for the birds’.
‘People can see that what Trump has done in the Middle East is going to cause economic challenges all around the world, with potentially higher inflation, weaker growth and weaker tax receipts,’ she said.
Ms Reeves said: ‘I’m angry that Donald Trump has chosen to go to war in the Middle East – a war that there’s not a clear plan of how to get out of. It’s why we didn’t want to enter this.
‘Yes it will have implications for our economy, I get that. We are monitoring very closely what’s happening – trying to bring the oil and gas into the UK so that those supplies are there and get the prices down. We are monitoring the situation very carefully.’
As Brits brace for impact from the energy shock:
- Rachel Reeves has reiterated that only poorer households would get any energy bailout, and played down the prospect of fuel duty cuts;
- The Chancellor has said she is ‘angry’ about ‘what Trump’s done in the Middle East’, saying it is causing ‘hardship’ for Brits and the UK did not want ‘any part of it’;
- Foreign Secretary Yvette Cooper is hosting an international summit tomorrow aimed at reopening the Strait of Hormuz, although Sir Keir stressed there is no prospect of UK patrols while the war is on;
- The food industry has cautioned that inflation could head towards double digits by the end of the year;
- The boss of Ryanair has warned of jet fuel disruption from next month unless the war ends soon;
- The PM has been accused of ‘misusing the King’ by allowing his US State Visit to go ahead;
- Around 1.3million more UK households are facing a jump in their mortgage costs following the economic ‘shock’, according to the Bank of England.
Responding to a listener who was worried about the spiking cost of filling up with fuel, Ms Reeves said: ‘I absolutely get why Liam and others are angry and frustrated about what is happening, because this country hasn’t done anything to cause those prices to rise.
‘But the decision of Donald Trump, a decision that Keir Starmer and this Government did not want any part of and are trying to de-escalate, is causing real hardship for people now.’
In an interview on BBC Breakfast, the Chancellor was challenged that a host of other countries had cut VAT and duty at the pumps and that was the quickest way to help Britons.
But Ms Reeves merely stressed she had already frozen fuel duty until September, and warned about levels of Government borrowing.
‘I’ve managed to get the public finances under control… I do not want to undo the work that we have done to put our public finances on a firmer footing,’ she said.
Asked if the message drivers should take away was that fuel duty would not be cut, Ms Reeves said: ‘We do have to be careful because every time you borrow more you put upward pressure on inflation, upward pressure on mortgage costs.
‘And you guarantee that taxes end up being higher in the future to pay back any money that you have borrowed to provide support.’
She added: ‘If I promised that I could alleviate every price increase for every person I wouldn’t be telling the truth.’
Trimming 5p off duty on petrol and diesel would cost the Treasury around £2.5billion a year.
Pressed if support could go beyond people who receive benefits, Reeves said: ‘We’re looking at ways in which we can support people based on their household income.’
She added: ‘I want to learn the lessons of the past because when Russia invaded Ukraine, the richest, the best-off third of households got more than a third of the support. That makes no sense at all.’
On the timing, Ms Reeves said: ‘From July to September, gas usage, especially by families and pensioners, is the lowest of any months of the year because it is the summer months.’
The PM is holding a Downing Street press conference this morning to update the country on the Government’s response, after the latest brutal barbs from Donald Trump.
Sir Keir is expected to stress the need for calm and highlight that the energy cap is keeping domestic bills down for the next three months. Business Secretary Peter Kyle toured broadcast studios earlier insisting that there is no sign of fuel shortages, despite alarming rises in pump prices.
However, there are calls within Government to do more to prepare the public for the pain to come.
