Chancellor responds to inflation figures for June

Consumer price inflation, UK: June 2026

Chancellor of the Exchequer, John Healey MP said: 

Falling inflation is news families want to hear but there is much more to do to give people the breathing space they need. 

That is why yesterday we cut VAT on electricity bills and today we're announcing a £2 cap on bus fares from January. We have chosen to focus on the cost of living in our first week, signalling that concern for working people will be at the heart of everything we do.

Both these changes are a win-win. They help keep inflation down, while helping people afford the essentials. 

Background information: 

• Millions of households across the UK will benefit from immediate government action to help with their electricity bills this winter.  
• Government is tackling rising bills with a tax cut to remove VAT from electricity bills from October 1, in time to impact the next Ofgem price cap. This immediate action applies and is funded for this financial year.
• Inflation is at its lowest level since March 2025 (2.6%) and the UK has seen the smallest inflationary impact of the war in Iran compared to our international peers.
• The OBR's forecast shows government policy will lead to CPI inflation being 0.4 percentage points lower than it otherwise would've been in 2026/27. 
• Before the escalation in the Middle East, it was forecast by the OBR and the Bank of England that inflation would fall to around the 2% target in April.    

Cost of living Measures:

• Millions of households across the UK will benefit from immediate government action to help with their electricity bills this winter.  
• Government is tackling rising bills with a tax cut to remove VAT from electricity bills from October 1, in time to impact the next Ofgem price cap. This immediate action applies and is funded for this financial year. 
• The change supports the poorest households, who spend a higher percentage of their income on energy bills.
• Today, we are announcing that from January single bus fares will be slashed by up to a third and we will cap bus fares outside of London at £2.
• Under the previous Chancellor, we took targeted action to support people with the cost of living: 
• The government launched the Great British Summer Savings scheme, which cut the VAT rate on eligible activities from 20% to 5% allowing families to enjoy discounted attractions and meals out this summer.  
  •  We have frozen rail fares for the first time in 30 years.     
  •  We increased the National Living Wage and National Minimum Wage, meaning that a full-time worker on the NLW will see an increase in pay of £900 a year and for someone on the NMW, working full time, it will mean a £1500 increase.  
  • We have lifted the two child-benefit cap, which will lift 450,000 children out of poverty by the end of this parliament.    
  • We froze the cost of a single prescription so they will remain under a tenner at £9.90.
  • The government slashed tariffs on over 100 items to bring down the cost of living. This is expected to save UK consumers around £230m - £370m a year.  
  • In August, families travelling this summer will benefit from free bus travel for children.  
  • The government has again extended the fuel duty cut to December 2026, meaning that by the end of this year the extension to the freeze on fuel duty will have saved the average driver £120 since 2025.  
  • We announced a 10p per mile increase in tax free mileage rates, backdated to April 2026; benefiting those who need to drive for work, from care workers to plumbers.