The government can act now where the Bank can't
As oil prices climb in the wake of the Iran conflict and inflation threatens to reach 5.8%, a British research institute has proposed an answer that is as old as the road itself: slow down. The Institute for Public Policy Research is urging the UK government to reduce speed limits, cut fuel duty, and cap energy prices — a £5 billion package that, in their reckoning, could spare the country from a far costlier economic reckoning. It is a moment that asks whether democratic societies can accept small, visible sacrifices in daily life to forestall larger, invisible harms to their collective wellbeing.
- Oil price shocks from the Iran conflict are pushing UK inflation toward 5.8%, threatening household finances and forcing the Bank of England toward interest rate rises it has so far managed to avoid.
- The IPPR's proposal — slower roads, cheaper fuel duty, a capped energy price — is deliberately modest in cost but bold in its ask of the public, particularly the politically charged demand to drive more slowly.
- Wales already tried the 20mph default limit in 2023 and watched road casualties fall by over 10%, yet more than half of residents still opposed it — a warning that evidence and public sentiment do not always travel the same road.
- Chancellor Rachel Reeves has signalled a preference for targeted support rather than broad intervention, placing the government's instincts in direct tension with the IPPR's sweeping emergency package.
- Without action, the institute warns, the Treasury stands to lose up to £8 billion annually in debt costs and lost tax revenues — making inaction its own form of expensive choice.
A British research institute is urging the country to do something deceptively simple: slow down. The Institute for Public Policy Research released an emergency package this week designed to protect the UK from the economic fallout of the Iran conflict, which has sent oil prices rising and threatens to push inflation toward 5.8%. At the heart of the proposal is a reduction in speed limits — 20 mph in towns and cities, 60 on motorways — on the straightforward logic that slower driving burns less fuel, and less fuel demand means lower prices.
The speed limit cuts are paired with a temporary 10-pence cut in fuel duty, running until spring 2027, and an energy price cap set at £2,000 per year, designed to activate automatically if Ofgem's projections breach that level. Gas and electricity bills are already expected to reach nearly £2,000 annually for average households by July. The full package would cost the Treasury around £5 billion per year — a figure that looks modest beside the £76 billion spent responding to the 2022 energy crisis.
The IPPR estimates the measures could reduce peak inflation by up to two percentage points and spare the Bank of England from raising interest rates, currently held at 3.75%. Senior economist William Ellis argued the government has room to act where the central bank does not, and that well-designed intervention could ultimately save more than it costs by preventing lasting economic damage.
The political terrain, however, is difficult. Wales introduced a 20 mph default limit in 2023 and saw road casualties fall by more than 10% within 18 months — yet a majority of Welsh residents still opposed the measure. Chancellor Rachel Reeves has already indicated that government support will be narrowly targeted, signalling scepticism toward broad interventions. The IPPR's warning is stark: without action, the Treasury could lose up to £8 billion annually through higher debt payments and reduced tax revenues. The question is whether that arithmetic will be enough to overcome political caution.
A British research institute is proposing something that sounds almost absurd in its simplicity: slow down. The Institute for Public Policy Research released a package of emergency measures this week aimed at shielding the country from the economic fallout of the Iran conflict, which has sent oil prices climbing and threatens to push inflation toward 5.8% if left unchecked. At the center of their proposal sits a radical reduction in speed limits—capping them at 20 miles per hour in towns and cities, and 60 on motorways.
The logic is straightforward enough. Slower driving burns less fuel. Less fuel demand means lower prices. Lower prices mean lower inflation. And as a bonus, the IPPR notes, slower streets are safer streets, which might nudge people toward walking and cycling for short journeys instead of driving at all. William Ellis, a senior economist at the institute, framed it as a moment for decisive action. "The UK cannot afford to sit back and let another energy shock drive up inflation and damage the economy," he said. The alternative, he warned, is that the economy and public finances will take a significant hit regardless of whether the government intervenes.
The speed limit cuts are just one piece of a three-part proposal. The IPPR is also calling for a temporary 10-pence reduction in fuel duty, to run until spring 2027, and a new energy price cap set at £2,000 per year—higher than the current quarterly cap of £1,641 but designed to trigger automatically if energy regulator Ofgem's estimates climb above that level. Gas and electricity bills are already projected to reach nearly £2,000 annually for average households starting in July. Together, these measures would cost the Treasury roughly £5 billion per year, the researchers estimate. That sounds substantial until you consider that the government's response to the 2022 energy crisis cost about £76 billion.
The payoff, according to the IPPR's modeling, could be substantial. The package would reduce peak inflation by up to two percentage points and potentially spare the Bank of England from raising interest rates—its primary tool for fighting price increases. The Bank has held rates steady at 3.75% but has signaled that increases may be necessary later this year. Governor Andrew Bailey warned last week that the longer the energy disruption persists, the more difficult the economic scenario becomes. Ellis argued that the government has room to act where the central bank does not. "The government can act now where the Bank can't, with a well-designed policy that acts to cap prices only in the most damaging scenarios," he said. In the best case, he suggested, the policy could save more than it costs by preventing permanent economic damage or sharp interest rate rises.
There is, however, a political obstacle. Speed limit reductions are unpopular. Wales implemented a default 20 mph limit in 2023, and a BBC poll conducted this year found that more than half of Welsh residents opposed the measure, even though road casualties fell by more than 10% in the subsequent 18 months. The International Energy Agency has already recommended that member countries, including the UK, consider lowering road speeds and restricting driving times as part of emergency measures similar to those deployed during the Covid pandemic. But public opinion and political will are not always aligned with expert recommendation.
Chancellor Rachel Reeves has already signaled that any government support this year will be targeted narrowly at those most in need, suggesting skepticism toward broad-based interventions. The IPPR's proposal sits in tension with that approach. Yet the stakes are real. Without intervention, the institute estimates, the Treasury could lose up to £8 billion annually from higher debt payments and lower tax revenues resulting from reduced economic growth. The question now is whether the government will treat this as a genuine emergency requiring bold action, or whether political caution will prevail.
Citações Notáveis
The UK cannot afford to sit back and let another energy shock drive up inflation and damage the economy.— William Ellis, senior economist at IPPR
The longer this problem goes on and the longer the disruption to energy supplies goes on, the more difficult the scenario we're in.— Andrew Bailey, Bank of England governor
A Conversa do Hearth Outra perspectiva sobre a história
Why would the government ever accept a speed limit cut? It seems politically impossible.
It does seem that way, but the IPPR is framing this as an emergency measure—like the restrictions during Covid. The idea is that if inflation really does spike toward 5.8%, the political cost of doing nothing becomes higher than the cost of acting.
But Wales tried this and people hated it, even though it made streets safer.
Exactly. That's the puzzle. The data showed real benefits—fewer deaths, fewer injuries—but public support never materialized. So the IPPR is bundling the speed cuts with other measures: fuel duty cuts, price caps. Maybe the package feels less punitive if you're also getting relief at the pump.
What's the real mechanism here? How does a speed limit actually lower oil prices?
It doesn't directly. But if millions of drivers burn less fuel, demand falls. When demand falls, prices fall. It's a demand-side intervention in a supply-shocked market.
And the Bank of England can't do that?
No. The Bank only has interest rates. Raising rates fights inflation but damages growth. The government can use fiscal tools—price caps, duty cuts, speed limits—that target the specific shock without the collateral damage.
So this is really about preventing interest rate hikes?
Partly. But it's also about preventing the kind of cascading damage that happened in 2022, when energy costs spiraled and the government spent £76 billion in emergency support. The IPPR thinks £5 billion now, spent strategically, could prevent that.