UK Think Tank Urges Fuel Duty Cut and Speed Limit Reduction to Shield Economy from Iran War Fallout

A prominent left-leaning think tank is calling on the UK government to cut fuel duty by 10 pence per litre and reduce motorway speed limits to 60mph, warning that without intervention, the ongoing conflict involving Iran could push inflation close to 6 per cent and stall economic growth.

The Proposals

The Institute for Public Policy Research (IPPR) published a report outlining a package of emergency economic measures it says would cost up to £5 billion per year but would effectively pay for themselves by averting broader fiscal damage.

In addition to the fuel duty reduction and speed limit change, the IPPR proposes capping typical household energy bills at £2,000, funded through targeted tax levies on energy companies, banks, and private air travel.

Pressure on the Chancellor

The fuel duty recommendation places Chancellor Rachel Reeves under pressure from an unexpected direction. She has already resisted calls from opposition parties and industry groups to abandon a planned 5 pence-per-litre fuel duty increase scheduled for later this year — a hike that critics say compounds already-rising forecourt prices driven by soaring oil costs.

The IPPR’s intervention signals that resistance to the increase now extends beyond the political right and business lobbies to voices on the left of the economic debate.

The Economic Risk

The think tank modelled the consequences of a prolonged Middle East stalemate and found that, without policy action, inflation could reach nearly 6 per cent while GDP growth slows to just 0.3 per cent.

That scenario, the IPPR warns, would trigger higher borrowing costs and erode tax revenues, ultimately costing the Treasury an estimated £8 billion per year.

William Ellis, senior economist at the IPPR, said: “The UK cannot afford to sit back and let another energy shock drive up inflation and damage the economy.”

Interest Rate Warning

The report follows a warning from the Bank of England last week that interest rates may need to rise as many as six times — reaching 5.25 per cent — if oil prices remain above $120 per barrel for a sustained period due to crisis conditions in the Middle East.

The IPPR argues its proposed measures, if implemented from July through the first quarter of next year, could reduce inflation by as much as two percentage points, relieving pressure on the Bank of England to deploy damaging rate increases.