London Daily

Focus on the big picture.
Thursday, Nov 27, 2025

Cost of living: Chancellor's aid will help you and make things worse at the same time

Cost of living: Chancellor's aid will help you and make things worse at the same time

Let's begin with perhaps the most important question: will this make a difference?

The short answer is yes. The stimulus the chancellor announced today is big - very big. It will affect all households and some - especially those on lower incomes, benefits and many pensioners - will get outsized one-off cash payments.

For the "average" household, such as it is, the fact that the energy bill rebate has been doubled will mean bills are no longer in totally unprecedented territory; instead they are only likely to hit the highest level since the early 1980s.

In short, this package will not prevent the coming year from feeling painful; however, it will certainly mean it is less painful in the short run than it would otherwise have been.

And the fact that a lot of this money is dedicated to lower income households who are hardest hit by the cost of living crisis is especially important. For one of the iniquities of inflation is that it is a very regressive economic phenomenon: it tends to affect the poorest the most.

This latest package is far better tailored to this problem than the deficient one introduced by the chancellor earlier this year.

Many would say that this is the very package Rishi Sunak should have produced in the spring statement back in March, and they have more than half a point.

They might point out, too, that contrary to what he said on Thursday, the outlines of what we are currently facing were already clear back then. But no point in dwelling on the past. The package is generous and progressive, and will help many households in the short term.

The big figures in today's package/budget are primarily one-off payments but it's also important to note there is a longer-term element in there.

For the chancellor also announced that next year's benefits and pensions will be increased in line with the inflation figure as of September. This is one of those throwaway lines which could easily be glossed over, but let's ponder it for a moment.

Inflation is likely to peak around this autumn - probably in October - at over 10%. In other words, September's inflation is likely to be very high. So the chancellor is planning to increase benefits and pensions a lot.

It's hard to know how much this will cost, in part because we don't yet know what inflation will be by then but just as if not more importantly because he has decided to announce all this stuff outside of a traditional budget, so isn't under any obligation to show his workings.

But my broad-brush calculation suggests this uprating could end up costing as much as £25bn.

Now consider that the complete package announced today was £15bn and you get a sense of what we're talking about.

This is, again, a lot of money.

Some, including Mr Sunak, will argue that this is the right decision given the crisis the UK is currently facing. However it's worth noting that this is a very different kind of message to the one he was attempting to give us only a few weeks ago.

For months, he has underlined that we should be careful about borrowing extra money. Today's plans involve borrowing at least another £10bn.

For months he has warned about the risks of inflation. His speech today began with a long section about the risks of rising prices. Yet this package, all told, looks very inflationary indeed.

It will put a lot more money into pockets and people will spend more which in turn will push up prices. So far from combating inflation, it makes the Bank of England's job even tougher, pushing up demand in the economy significantly.

To some extent this just underlines the difficulties of policymaking right now.

Energy markets are sending us a message: there is not enough supply of energy to satisfy our demand for the stuff. One response is to allow people's spending to decrease so demand matches supply; but that involves a recession.

Another response is to pump up demand. But that poses the risk of embedding inflation in the economy, making it even more difficult to reduce. It also makes it far more likely that the Bank will have to raise interest rates in the coming months.

Things are already bumpy. This package, necessary as it might feel, may make things even bumpier, especially once the short term sugar rush of those giveaways wears off.

Newsletter

Related Articles

0:00
0:00
Close
UK to Slash Key Pension Tax Perk, Targeting High Earners Under New Budget
UK Government Announces £150 Annual Cut to Household Energy Bills Through Levy Reforms
UK Court Hears Challenge to Ban on Palestine Action as Critics Decry Heavy-Handed Measures
Investors Rush Into UK Gilts and Sterling After Budget Eases Fiscal Concerns
UK to Raise Online Betting Taxes by £1.1 Billion Under New Budget — Firms Warn of Fallout
Lamine Yamal? The ‘Heir to Messi’ Lost to Barcelona — and the Kingdom Is in a Frenzy
Warner Music Group Drops Suit Against Suno, Launches Licensed AI-Music Deal
HP to Cut up to 6,000 Jobs Globally as It Ramps Up AI Integration
MediaWorld Sold iPad Air for €15 — Then Asked Customers to Return Them or Pay More
UK Prime Minister Sir Keir Starmer Promises ‘Full-Time’ Education for All Children as School Attendance Slips
UK Extends Sugar Tax to Sweetened Milkshakes and Lattes in 2028 Health Push
UK Government Backs £49 Billion Plan for Heathrow Third Runway and Expansion
UK Gambling Firms Report £1bn Surge in Annual Profits as Pressure Mounts for Higher Betting Taxes
UK Shares Advance Ahead of Budget as Financials and Consumer Staples Lead Gains
Domino’s UK CEO Andrew Rennie Steps Down Amid Strategic Reset
UK Economy Stalls as Reeves Faces First Budget Test
UK Economy’s Weak Start Adds Pressure on Prime Minister Starmer
UK Government Acknowledges Billionaire Exodus Amid Tax Rise Concerns
UK Budget 2025: Markets Brace as Chancellor Faces Fiscal Tightrope
UK Unveils Strategic Plan to Secure Critical Mineral Supply Chains
UK Taskforce Calls for Radical Reset of Nuclear Regulation to Cut Costs and Accelerate Build
UK Government Launches Consultation on Major Overhaul of Settlement Rules
Google Struggles to Meet AI Demand as Infrastructure, Energy and Supply-Chain Gaps Deepen
Car Parts Leader Warns Europe Faces Heavy Job Losses in ‘Darwinian’ Auto Shake-Out
Arsenal Move Six Points Clear After Eze’s Historic Hat-Trick in Derby Rout
Wealthy New Yorkers Weigh Second Homes as the ‘Mamdani Effect’ Ripples Through Luxury Markets
Families Accuse OpenAI of Enabling ‘AI-Driven Delusions’ After Multiple Suicides
UK Unveils Critical-Minerals Strategy to Break China Supply-Chain Grip
Taylor Swift’s “The Fate of Ophelia” Extends U.K. No. 1 Run to Five Weeks
UK VPN Sign-Ups Surge by Over 1,400 % as Age-Verification Law Takes Effect
Former MEP Nathan Gill Jailed for Over Ten Years After Taking Pro-Russia Bribes
Majority of UK Entrepreneurs Regard Government as ‘Anti-Business’, Survey Shows
UK’s Starmer and US President Trump Align as Geneva Talks Probe Ukraine Peace Plan
UK Prime Minister Signals Former Prince Andrew Should Testify to US Epstein Inquiry
Royal Navy Deploys HMS Severn to Shadow Russian Corvette and Tanker Off UK Coast
China’s Wedding Boom: Nightclubs, Mountains and a Demographic Reset
Fugees Founding Member Pras Michel Sentenced to 14 Years in High-Profile US Foreign Influence Case
WhatsApp’s Unexpected Rise Reshapes American Messaging Habits
United States: Judge Dressed Up as Elvis During Hearings – and Was Forced to Resign
Johnson Blasts ‘Incoherent’ Covid Inquiry Findings Amid Report’s Harsh Critique of His Government
Lord Rothermere Secures £500 Million Deal to Acquire Telegraph Titles
Maduro Tightens Security Measures as U.S. Strike Threat Intensifies
U.S. Envoys Deliver Ultimatum to Ukraine: Sign Peace Deal by Thursday or Risk Losing American Support
Zelenskyy Signals Progress Toward Ending the War: ‘One of the Hardest Moments in History’ (end of his business model?)
U.S. Issues Alert Declaring Venezuelan Airspace a Hazard Due to Escalating Security Conditions
The U.S. State Department Announces That Mass Migration Constitutes an Existential Threat to Western Civilization and Undermines the Stability of Key American Allies
Students Challenge AI-Driven Teaching at University of Staffordshire
Pikeville Medical Center Partners with UK’s Golisano Children’s Network to Expand Pediatric Care
Germany, France and UK Confirm Full Support for Ukraine in US-Backed Security Plan
UK Low-Traffic Neighbourhoods Face Rising Backlash as Pandemic Schemes Unravel
×