How the government's latest cost of living measures could help you

A summer VAT cut on certain leisure and restaurant activities and free bus travel for children are among the key policies in the government’s latest attempts to help households with the cost of living crisis.

It comes as inflation remains high and is predicted to increase further due to the Iran conflict.

Oil prices have been rising since the Iran war began in February and there are warnings that energy bills could rise and food prices could also go up due to delays in getting supplies amid the continued closure of the Strait of Hormuz.

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Motorists are already seeing the impact at the petrol pumps and the Treasury has tried to address some of those costs by extending the fuel duty freeze until the end of 2026. It was due to be phased out from September.

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Chancellor Rachel Reeves unveiled another range of measures, dubbed the Great British Summer Savings, to Parliament today aimed at cutting the costs for families to get out this summer.

This includes a VAT cut on eligible summer activities to help families as well as free bus travel for children.

Reeves said: “Whether it is a fun day out, a family meal or taking advantage of the thousands of amazing attractions across the UK, Great British Summer Savings will support families with the little treats in life while boosting business across the UK.

“This comes on top of support we’ve already put in place including freezing fuel duty, taking off £117 off energy bills, freezing prescriptions, fuel duty and rail fares.”

The scheme is estimated to cost about £300 million.

Additionally, the government is aiming to help make people's grocery shopping cheaper by suspending tariffs on more than 100 different foods sold in supermarkets.

Summer VAT cut

From 25 June to 1 September 2026, a reduced 5% rate of VAT (down from 20%) will apply to services in England, Wales, Scotland and Northern Ireland including children’s meals served in restaurants, as well as children’s and family tickets for cinema, theatre, exhibitions, shows and concerts.

The cut will also be applied to admission tickets for both children and adults to a range of attractions, such as amusement parks, fairs, circuses, museums, zoos, adventure parks, soft play and observation attractions.

The Treasury confirmed to MoneyWeek that adults without children can still access the savings on attractions.

The idea is that people can get out and spend money in the economy at a cheaper rate, as long as businesses pass on the VAT savings.

If a business chooses to pass on the full VAT savings, a family of two adults and two children could get £9 off tickets to the circus, £17 off tickets to a wildlife park and £20 off tickets to a theme park, according to the Treasury.

Free bus travel

Throughout August, all children aged five to 15 in England will be able to travel for free on any local bus service.

The Treasury said this will help more families access summer activities while reducing pressure on household budgets.

This is good news for people living outside London. Those in the capital can already get free travel on the London Underground using a five to 15-year-old zip card.

Food tariffs

The government is also aiming to bring down food prices by suspending tariffs on more than 100 types of products including biscuits, chocolate and dried fruit and nuts.

A full list of products with suspended tariffs will be revealed next week.

The expected benefit to consumers is more than £150 million a year, the Treasury said.

Will the cost of living measures help you?

Cheaper days out will be attractive to anyone.

But there is no requirement for businesses to pass on the full VAT savings so the actual benefit may depend on the attraction.

Similarly, it will be up to supermarkets to pass on the savings to customers of suspended food tariffs, which Reeves said she expects to be done in full.

Charlotte Kennedy, chartered financial planner at Rathbones, highlights that these measures are rightly aimed at limiting price rises in areas of inflation that are often unavoidable for many households, such as food and travel.

But she warned: “While any targeted support will be welcomed by many households, the impact of rising prices is unlikely to be felt evenly. Lower-income families and those already spending a larger share of their income on essentials may continue to face significant pressure on household budgets.

“It is also worth remembering that everyone experiences inflation differently, depending on their individual spending habits.

"As such, it remains important to keep a close eye on your finances to maintain financial resilience. This may include reviewing regular outgoings, prioritising high-interest debt repayments where possible, and building up a rainy-day fund – with three to six months’ worth of living expenses often considered a good rule of thumb.”