London Daily

Focus on the big picture.
Saturday, Aug 29, 2026

UK economy: When are you going to feel better off?

UK economy: When are you going to feel better off?

When are you going to feel better off?

How politicians answer that big question sets the terms for the next election. The response is certainly not this week.

Prime Minister Rishi Sunak might have told MPs "we are halving inflation" but repeating that political slogan in the Commons doesn't make it true. In fact he was wrong - just as economic sages were mistaken.

Prices went up faster in February than in January - which came as a surprise to the experts. Interest rates edged up too and will make rent, mortgages and credit more expensive.

The message to workers, firms and families this week is bleak - your costs are going up but don't ask for a pay rise and don't put your prices up if you're a business.

There is no shortage of evidence of how hard it is for millions of families to pay the bills. By the Treasury's admission inflation "strangles growth and erodes family budgets".

And its effects can be long-lasting. As one German economist said: "Inflation is like toothpaste. Once it's out, you can hardly get it back in again."

As an aside, even that essential item has gone up significantly, with one famous brand hiking prices of a tube from £3 to £4.

What the government hopes is that next month, and the month after that, and the month after that, the number crunchers are correct and inflation will drop pretty sharply by the end of the year and the toothpaste does, after all, go back in the tube.

But inflation slowing down doesn't mean prices will drop. What politicians and the public have to confront is that there could be many years where voters feel hard up.

For this week's show we asked Richard Hughes - the country's number cruncher in chief who runs the independent Office for Budget Responsibility - how he would answer that big question. If you're squeamish about your finances you might want to look away now.

He told me we're in the middle of "the biggest squeeze on living standards we've faced in this country on record" - but also it might be five or even six years before people start feeling more prosperous again.

As he put it: "People's real spending power doesn't get back to the level it was before the pandemic even after five years, even by the time we get to the late 2020s." Gulp.

There is also a separate and tricky conversation to be had about the influence of his organisation, the OBR.

Their work, famously ignored by Liz Truss and Kwasi Kwarteng when they were in charge, tells governments how much they can spend and borrow if they want to stick to their own rules about when they will balance the country's books.


The idea is that with an independent body publicly checking ministers' arithmetic the public can have confidence in what's being done.

But their forecasts, as Mr Hughes happily admits, often turn out to be wrong, and change every six months. Yet they can have enormous influence over what politicians decide.

For example, several sources told me the government only decided to expand childcare in the recent Budget because the OBR told them more than half of the cost would be covered by the benefit of getting some parents back to work.

You can, as many politicians do, believe in the merits of having an independent expert cast their eye over the figures, but also have quiet concerns about how the OBR can draw the limits of political conversations when its forecasts - through no fault of its own - change dramatically.

Whether you are asking an economist, a politician, or just looking at your own bank balance, the broad assessment is not likely to shift - times are tough for the foreseeable future.

Inflation - the politicians' nightmare - is likely to drop by the end of the year, but Rishi Sunak and Keir Starmer are going to have to tempt you to the ballot box in 2024 when the country still feels hard up.

We can already see the outlines of the Conservatives' script. With inflation (they fervently hope) down and the economy (fingers crossed) avoiding recession there will, ministers believe, be signs the country's fortunes have turned and they can persuade hard-up voters to stick with them.

As one minister says: "The argument we want to make is 'I'm just starting to feel better off, don't risk it'."

We've lived through unprecedented hard times, they'll argue, and things are getting better so don't take a chance on something new.

The aspiration is also that ministers will be able to start cutting taxes again - perhaps in the autumn of this year or more likely next spring.

One former cabinet minister says voters will start to feel better off once a Conservative government is re-elected because they hope they'll be able to say during the campaign that "inflation is lower, wages outstripping inflation" and they have a "clear plan for the economy".

Even if Rishi Sunak becomes an expert in political gymnastics it's unlikely the Conservatives will avoid taking any flak for the hammering incomes have taken while they've been in charge.

But you can expect in the next few months for ministers to emphasise more regularly the help that's already on offer - whether that's cheaper bus fares or the hugely expensive energy price guarantee.

If you ask Labour politicians when the country will feel better off the answer is also far in the future.

One shadow minister says the decline in living standards has been "brutal" while another says "people are not going to feel better off for a very long time".

Even if inflation does start to slow, if you believe the polls that show Labour way ahead the tough economic reality for many families gives them a political advantage.

However strongly the Conservatives argue they've had to deal with unprecedented pressures, hard-up voters do not tend to reward those in charge. But wise Labour heads are all too aware that successful oppositions don't just say "we're not the other guys".

That's why we're seeing the leadership put so much time and effort into trying to create a sense they would spend taxpayers' money wisely and talk repeatedly about how they would get the economy to grow.

The shadow minister believes Labour tends to win when it offers "hope after years when the Tories look a bit clapped out".

So when we ask "when are you going to start feeling better off?" the answer is "not much, if at all, before the next election".

It's likely that vote will happen when there is not much cash in our own pockets or the public purse.

And we face a conversation where the Conservatives seize on any signs of progress to claim a change is not worth the risk while Labour highlights the hard times we have been living through and says it's time for something else.

Just like economic forecasts, political predictions can turn out to be miles off. And of course, how we make a living and how the country pays its way is not the only factor determining how people vote.

But after years of hardship you'll be asked in the general election who you believe will help you be better off.

The answer millions of voters give will likely determine who takes No 10.

Newsletter

Related Articles

0:00
0:00
Close
Police Intensify Investigation Into Organised Crime-Linked Violence in Middlesbrough
UK Small Businesses Face Continued Revenue and Tax Pressures, Federation Says
M&G Real Estate Buys West Sussex Affordable Housing Portfolio for £29 Million
Royal Navy Warship HMS Tamar Visits Cambodia for Regional Security Engagement
UK Government Brings Forward Benefit Payments Ahead of August Bank Holiday
Four Men Plead Guilty to Arson Attack on Jewish Community Ambulances in North London
Ofgem Raises Great Britain’s Household Energy Price Cap by Four Percent From October
UK Government Rejects Green Party Call for Artificial Intelligence Datacentre Moratorium
Millions of UK Benefit Recipients Receive Payments Early Ahead of August Bank Holiday
UK Prime Minister Meets Northern Ireland Leaders in Belfast Over Budget Crisis
Crypto Tax Gains Reach One Point Three Eight Billion Pounds Among UK Investors, HMRC Data Shows
UK Corporate Confidence Rises to Highest Level Since March, Lloyds Survey Shows
Mike Ashley Attacks UK Government Business Rates and Cost-of-Living Policies
Scottish Universities Face Two Hundred Million Pound Annual Funding Gap, Report Warns
Entertainment Figures Urge UK Government to Protect People From AI Voice Cloning
Manchester Airports Group Confirms Customer Data Breached in Cyberattack
Seven Charged Over Vandalism at Donald Trump’s Turnberry Golf Resort in Scotland
Nearly 23,000 UK Households Expected to Move Home on Busiest Day of 2026
UK Benefit Payments to Arrive Early Ahead of August Bank Holiday
Reform UK Pledges to Replace GDPR and Cut Tax Administration Red Tape
Andy Burnham Launches Work Experience Plan for One Million Young People Outside Education or Work
Andy Burnham Faces Labour Backlash After Dropping Support for Political Donations Cap
Andy Burnham Announces UK-Wide Summit With Leaders of Scotland, Wales and Northern Ireland
Met Office Warns of Heavy Rain and Flood Risk Across England and Wales After Summer Heat
Bank of England Warns AI Adoption Could Reduce Demand for Automatable Jobs
UK Confirms National Salmonella Outbreak With More Than 200 Cases
UK Airports Handle Record 81 Million Passengers Despite Middle East Disruption
Ofgem Raises UK Energy Price Cap by Four Percent to £1,723
Cyber Attack Hits Customer Data Systems at Manchester, Stansted and East Midlands Airports
TSA Unveils Major Airport-Security Overhaul as It Drops Gold+ Privatization Plan
CIA Chief Warned Russia Against Attacking NATO in Secret Moscow Mission
Raheem Sterling Charged With Dangerous Driving After Lamborghini Crash
The Secret Dolly Parton Kept Until Her Death: "She Was Much Sicker Than She Let On"
Middlesbrough House Fire Kills Woman and Seven-Year-Old Girl
Prince Harry and Meghan Markle Return to UK Amid Renewed Media Attention
Raheem Sterling Charged With Dangerous Driving After London Collision
Greenpeace Threatens Legal Action Over Crown Estate Offshore Wind Leasing
Nvidia Revenue Surges to Ninety-Six Point Two Billion Dollars on Artificial Intelligence Demand
Meta Agrees to Global Youth Safety Changes Following Multi-State Legal Settlement
UK Government Plans Autumn Summit With Scottish, Welsh and Northern Irish Leaders
CMA Caps Veterinary Prescription Fees at Twenty-One Pounds
Thames Water Pilot Records Forever Chemicals at Thirteen Times the Legal Limit
Kent Meningitis Outbreak Reaches Thirty-Four Confirmed Cases
Forty Children Missing From UK Asylum Accommodation Remain Unaccounted For
UK Court Upholds VAT on Private School Fees
US Designates Palestine Action as Foreign Terrorist Organization
UK Approves Massive New Chinese Embassy Complex in London Amid Security Concerns
Prime Minister Andy Burnham Visits Kyiv and Offers Cruise Missile Designs to Ukraine
Glacier Collapse, Not Earthquake, Triggered Deadly Nepal-Tibet Flood
Andy Burnham Drops Plan to Cap Political Donations
×