A Labour-linked think tank, the Institute for Public Policy Research (IPPR), has warned that the ongoing conflict in the Middle East could significantly damage the UK economy. Modelling suggests inflation could soar to 5.8 per cent, potentially costing the Treasury up to £8bn annually through higher debt interest payments and reduced tax revenues.
Proposed Measures
The IPPR recommends a series of measures to mitigate the economic fallout. These include a temporary £2,000 energy price cap, a 10p cut in fuel duty, and lower speed limits to curb energy demand. The think tank also proposes targeted, progressive taxes, such as a strengthened windfall tax on energy profits, to offset the costs of these interventions.
Government Response
The Treasury responded by stating its priority is de-escalation and highlighted existing measures like the extended fuel duty cut and the falling energy price cap. Prime Minister Starmer has warned that Iran’s attempts to destabilise British society ‘will not be tolerated’.
The IPPR’s recommendations come as the UK grapples with the potential economic consequences of the Iran conflict, which could exacerbate the cost-of-living crisis and strain public finances.
