The poorest households in Britain have become poorer since Labour took office, while the wealthiest have seen their disposable income rise sharply, according to stark new figures.
The findings represent an awkward moment for Sir Keir Starmer as he prepares to place the cost of living at the heart of his New Year message to voters and Labour MPs.
Analysis by Retail Economics shows that the amount of money left over for the poorest households after paying bills and essential costs has fallen by 2.1 per cent since Labour came to power in July 2024. In contrast, the most affluent households have seen their discretionary income increase by 10.3 per cent over the same period.
The figures come despite repeated pledges from the Prime Minister to “wage all-out war” on the cost of living. With Labour trailing Reform UK in recent polls and braced for potential losses in May’s local elections, Sir Keir is expected to highlight measures such as forthcoming cuts to energy bills, due to take effect in April, and the abolition of the two-child benefit cap as evidence the government is easing financial pressure on families.
In a New Year article for the Daily Mirror, Sir Keir wrote about a letter he received from a nine-year-old girl in Scotland describing the realities of child poverty. “The hunger from missing breakfast. The cold of unheated rooms. The embarrassment of a worn-through school uniform. The tiredness and exhaustion that comes with all of it,” he wrote, adding that it was “shocking to think that the vast majority of children growing up in poverty in Britain today come from working families”.
He said the government would lift more than half a million children out of poverty by scrapping the two-child benefit limit, expanding free school meals and continuing its “all-out war on the cost of living”.
In a separate New Year video message, the Prime Minister predicted the UK would “turn a corner” in 2026, saying people would begin to feel “a sense of hope” in the coming months despite a series of negative economic headlines.
Opposition figures seized on the data. Richard Tice, deputy leader of Reform UK, told The Telegraph that Labour had “lost control” of the cost of living. Meanwhile, Labour backbencher Graham Stringer said the figures were disappointing but not surprising, arguing that current energy policy subsidises wealthier households while increasing bills for poorer families.
The Retail Economics figures focus on discretionary income, defined as the money households have left after spending on essentials. Nicholas Found, from the consultancy, said: “The reality is that lower-income families are still grappling with the legacy of surging prices, with finances playing catch-up as the cost of everyday products is significantly higher than it was four years ago.”
The analysis includes changes in taxation and household bills that are not fully captured by official statistics from the Office for National Statistics, suggesting that the financial pressure on poorer households may be greater than headline figures imply.
