Funding the Future What should Rachel Reeves do now?
Mar 11, 2026
War-driven oil price rises are pushing up UK inflation through a supply shock. The conversation covers whether the state should shield households or leave them to absorb costs. Proposals discussed include cutting VAT and fuel duty, stabilising long-term interest rates, and using government powers to protect incomes rather than hiking rates.
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War Driven Imported Inflation
- Oil price rises from Middle East war create imported inflation rather than domestic overheating.
- Richard Murphy explains energy shocks feed transport, heating, electricity and food, so higher oil raises broad UK prices not caused by household demand.
Cut VAT To Offset Price Shock
- Cut VAT to reduce prices automatically because VAT is an addition on top of sellers' basic sale price.
- Richard Murphy argues a VAT cut lets the state absorb part of the energy-driven inflation shock rather than households.
Temporarily Reduce Fuel Duty
- Reduce fuel duty temporarily to protect households who must travel for work and school.
- Murphy highlights that rising fuel costs hit lower income households hardest and public transport isn't always an option.