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The Iran War Economic Response
Edited by Peter Warrington, 2026-06-12 MPs debate the Economic impact of the War in Iran and the effectiveness of the Government response.Key Quotes:
“On the Iran conflict, let us remember that this is a war that the UK did not start and this Government chose not to join, whereas the Conservatives and Reform were cheering on the conflict every step of the way. The impact on the UK and global economies would be much more severe if we had heeded the pleas of Reform and the Conservatives to join that conflict.” - Rachel Reeves (Labour)
“It was always obvious that the fuel duty increase would need to be cancelled — obvious to everyone except the Chancellor. Why did she fight us on fuel duty for so long? Why has she been so hellbent on raising fuel duty during an energy crisis? Well, the inevitable U-turn has finally come…” - Sir Mel Stride (Conservative)
“All that time, we were told repeatedly that it was impossible to do those things and there was no additional money. Somehow, with the prospect of a by-election in Makerfield and the Prime Minister’s political life being on the line, the money has been found.” - Daisy Cooper (Liberal Democrat)
“The Chancellor’s approach to the cost of living crisis is to find small ways to subsidise people’s costs, but is not the best solution to build a strong, abundant economy by doing the hard yards of supply side reform? In that economy, there would be better jobs and higher wages, people would be richer and the state would have less bearing on their lives, yet under the Chancellor, the benefits bill is ballooning, unemployment is rising, particularly among the young, and taxes are at their highest ever level.” - Robert Jenrick (Reform)
“Before I call the Chancellor to make her statement, I have to say to her that Mr Speaker has checked the ministerial code, which makes it clear that important policy announcements should be made in the first instance in this House when it is sitting. This House and its Members should be the first to know what the Government are doing—not TikTok. Posting videos on social media to announce new policies before informing this House is not in line with the Government’s own rules.” - Madam Deputy Speaker (Judith Cummins)
House of Commons Economic Response Statement - 21st May 2026
Before the statement began, Madam Deputy Speaker (Judith Cummins) issued a warning to the Chancellor regarding the announcement of the policy:
Before I call the Chancellor to make her statement, I have to say to her that Mr Speaker has checked the ministerial code, which makes it clear that important policy announcements should be made in the first instance in this House when it is sitting. This House and its Members should be the first to know what the Government are doing—not TikTok. Posting videos on social media to announce new policies before informing this House is not in line with the Government’s own rules.
The Chancellor of the Exchequer, Rachel Reeves (Labour) then made her statement to the House:
… I will make a statement on the Government’s economic response to the war in Iran and the action that we are taking to support families and businesses with rising costs. … the conflict in the middle east poses a significant challenge to the world’s economy, including our own. I have not shied away from my criticism of the war; I believe it to have been a mistake. Nor have I ignored the costs that it will bring to bear on the British people.
… I am today establishing a £350 million critical chemicals resilience fund… [and] a new £120 million fund to help our historic ceramics sector… We are granting hauliers a 12-month road tax holiday… I have decided to cut duty on red diesel by over a third… and [announce] a 10p per mile increase in tax-free mileage rates… Today, I am bringing forward specific changes to the taxation of foreign branch profits… Currently, some oil and gas groups… pay little or no corporation tax on their UK energy trading profits. Today, we are putting an end to that practice.
… I can confirm today that there will be no rise in fuel duty this year… I am taking action by suspending tariffs on over 100 different foods… bus travel across England will be free for children aged between five and 15 throughout August… [and] I can today announce a temporary cut in the rate of VAT on summer attractions from 20% to 5% over the summer holidays.
Sir Mel Stride (Conservative) responded on behalf of the Opposition:
I thank the Chancellor for advance sight of her statement… The decision taken to cancel the increase in fuel duty is welcome… The Conservative party has been campaigning against the fuel duty rise for months, but the Chancellor has defended that policy repeatedly… Why has she been so hellbent on raising fuel duty during an energy crisis? … Is she seriously suggesting that the economic outlook is now better… when we have had the Iran conflict, to which our economy is highly exposed thanks to this Government’s ruinous choices?
… Given that the Chancellor has not announced any measures to control Government spending, will she confirm that, in fact, the measures that she is announcing today will be funded, at least in part, by yet more Government borrowing? … Today’s announcements will bring little comfort to the hundreds of thousands of people who have lost their jobs, the countless businesses that have folded and the high streets that are now hollowed out.
Rachel Reeves (Labour) responded to the Shadow Chancellor:
On fuel duty, when I became Chancellor of the Exchequer, the freeze in fuel duty was due to expire… I have frozen fuel duty twice already and I have frozen it again today… On the Iran conflict, let us remember that this is a war that the UK did not start and this Government chose not to join, whereas the Conservatives and Reform were cheering on the conflict every step of the way. … The shadow Chancellor asks whether that will be paid for with new borrowing. No, it will not. … the foreign branch exemption… will raise hundreds of millions of pounds a year, which is why we are able to afford the package that we have announced today.
Daisy Cooper (Liberal Democrat) was next to respond on behalf of her party:
For six months, we Liberal Democrats have been calling for an emergency temporary VAT cut for hospitality, leisure and attractions, and our pledge was fully funded. … Somehow, with the prospect of a by-election… and the Prime Minister’s political life being on the line, the money has been found. … in looking at the tariffs, has the Chancellor had any conversations with the food manufacturing industry about whether it can remain competitive? Does removing the tariffs inadvertently risk undermining our food manufacturing sector?
Rachel Reeves (Labour) responded:
I am not sure whether she welcomes the changes around the foreign branch exemption, which is what will pay for the policies announced today… Unless we can say where the money will come from, all that results is higher inflation and interest rates in the future. … On food, the hon. Lady cannot both say that she welcomes help with the cost of living, and then be a bit uncertain about tariff reductions. We have focused the tariff reductions on food products and agrifoods that we do not produce in significant quantities in the UK.
Mr Alistair Carmichael (Liberal Democrat) raised concerns on behalf of the farming sector:
Last year, suckler beef farmers in my constituency were getting paid £7.30 per kilo for their finished product on the hook. Yesterday that was down to £5.75, and it is still falling. … The red diesel duty cut is welcome, but it will not help farmers who are struggling with rocketing fertiliser prices… Opening the door ever wider to food imports risks undermining domestic food production. If food security genuinely is national security, surely our food producers and manufacturers should have access to the same support as other critical sectors.
Rachel Reeves (Labour):
The reduction of more than a third in the rate of duty on red diesel will have an immediate and important impact on the costs for farmers. … That is why we are doing everything within our power to reopen the strait of Hormuz, to ease these pressures on consumers and businesses, including farmers, but also in the meantime to diversify supply and open up new refining facilities in the UK, to help businesses, including farmers, during these challenging times.
Kirsty Blackman (SNP) questioned the impact of the foreign branch profit tax on the energy sector:
The UK is losing 1,000 oil and gas jobs a month. … On the foreign branch profits announcement today, have the Government modelled the job losses that may occur as a result of this change in the oil and gas taxation regime? Can she tell the House how many jobs might be lost as a result?
Rachel Reeves (Labour):
At the moment, we have the absurd situation where losses overseas can mean that businesses avoid paying their fair share of corporation tax in the UK. This moves us in line with what other countries do. It is closing a tax loophole, and the hon. Lady and the Conservatives should welcome that.
Robert Jenrick (Reform) questioned the Chancellor on economic reform and taxation:
The Chancellor’s approach to the cost of living crisis is to find small ways to subsidise people’s costs, but is not the best solution to build a strong, abundant economy by doing the hard yards of supply side reform? … under the Chancellor, the benefits bill is ballooning, unemployment is rising, particularly among the young, and taxes are at their highest ever level. … will the Chancellor confirm… that she will not be increasing taxes on working people at all for the rest of this Parliament?
Rachel Reeves (Labour):
I will take absolutely no lessons from the man who was part of a party that took our economy to its knees—inflation at 11%, working people worse off at the end of the last Parliament than they were at the beginning… or from a party that has opposed all our reforms to make it easier to get things built in Britain, to increase the wages of working people with the national living wage and the national minimum wage… If we want a lesson on economics, I certainly will not be taking it from the Reform party.
Dr Ellie Chowns (Green) advocated for year-round interventions and a wealth tax:
Does the Chancellor not recognise, however, that struggling families need help year round, not just short-term sticking plasters in the summer holidays? The Green party is calling for free bus travel for everybody under 22, year round. We are calling for free school meals for all children… This could be funded easily by taxing wealth fairly. Will she take that year-round bold action to tackle the cost of living crisis properly?
Rachel Reeves (Labour):
… we are helping working people. The Renters’ Rights Act 2025 is the biggest upgrade in the rights of renters in a generation; the Employment Rights Act 2025 is the biggest upgrade in the rights of working people for a generation. … The measures that I have set out in my statement today on bus fares, fuel duties, VAT and hospitality, and more, will give further help, both in Herefordshire and around the country.
Following the announcements of VAT cuts to summer attractions, a lighter debate emerged regarding which constituency boasted the best tourism destinations.
David Williams (Labour):
The good news is that my mum is watching again right now at home, and she is clearly happy, because I have had a three-word text from her: ‘Nice one, duck.’
Rachel Reeves (Labour):
I am slightly worried that my statement has unleashed a competition between hon. Members about whose constituency has the best summer attractions, whether it is soft play, theme parks, zoos or ice skating… I look forward to this continuing ahead of the introduction of VAT reductions on 25 June.
Madam Deputy Speaker (Caroline Nokes):
I thank the Chancellor for her statement, but I am obliged to point out that, in fact, Peppa Pig World, on the edge of my constituency, is the finest attraction in the country.