Labour Milestones Review: Raising living standards

As the summer of 2025 draws to a close, the Government’s milestone to ‘raise living standards so working people have more money in their pockets’ sits in a complex economic landscape. Polling patterns suggest that inflation continues to weigh heavily on public perceptions of economic competences and while inflation has eased from the peaks of the cost-of-living crisis it remains at around 3.6%, above the Bank of England’s 2% target. Moreover, for many households, the modest GDP growth of 0.3% in the last quarter offers little tangible relief when combined with rising unemployment, now at its highest level in four years.

Labour’s central interventions have focused on wage policy. In April, the National Living Wage rose by 6.7% to £12.21, with projections to reach at least £12.71 by next spring. Moreover, the Low Pay Commission’s remit has been expanded to consider cost-of-living measures when it makes future recommendations to the Government on the minimum wage.

However, surveys from Lancaster University suggest that almost half of workers have little left after covering essential bills, with low-income households especially doubtful that wages will keep pace with rising costs. Similarly, the Joseph Rowntree Foundation calculates that average disposable incomes remain £400 below pre-pandemic levels, with the poorest fifth of households on course to see a 6% drop by 2030. The Resolution Foundation notes that for higher earners, apparent gains can be offset once the value of public services and tax changes is factored in, making any perception of improvement more reliant on service delivery than on disposable income alone.

A turning point came in the spring when the Government was forced to row back on some of its proposed reforms to disability benefits after a sharp backlash from campaigners, charities, and backbench MPs. Although the U-turn avoided a Labour rebellion, it created a gap in the Government’s fiscal plans; as planned savings from welfare reform were baked into the Budget’s forecasts. This gap will need to be filled, and attention is turning to the possibility of further tax rises in the autumn, a move that could complicate Labour’s narrative of helping working people keep more money in their pockets. According to the National Institute of Economic and Social Research, the Chancellor may now need to find more than £40bn of tax rises or spending cuts in the autumn budget to meet her fiscal rules.

Moreover, business groups warn that higher employer costs, from the NLW to National Insurance and the Employment Rights Bill currently going through Parliament, risk dampening investment and hiring. The CBI projects growth of just over one percent this year, enough to avoid recession but not enough to produce the rising tide needed to lift all boats.

The milestone of raising living standards was never going to be achieved within a single year, but by mid 2025 Labour’s progress feels somewhat incomplete. The challenge heading into the autumn spending round is to deepen and accelerate measures that deliver direct, visible benefits.

For more on how the Labour Government is delivering on its promises, read the Vuelio Political team’s take on its housing, policing, healthcare, and education commitments.