Fresh economic data has delivered a stark blow to Prime Minister Keir Starmer, revealing a widening wealth gap since his party entered government. The figures show the poorest households in Britain have become significantly poorer, while the richest have enjoyed a substantial boost to their disposable income.
Discretionary Income Plummets for the Most Vulnerable
According to analysis from the independent consultancy Retail Economics, the amount of money the poorest households have left after covering bills and essential spending has fallen by 2.1% since Labour came to power in July 2024. In sharp contrast, the most affluent households have seen their discretionary incomes rise by 10.3% over the same period.
These findings, which include changes in tax and bills not fully captured by official Office for National Statistics data, paint a troubling picture of the nation's economic health. They emerge as Sir Keir prepares to centre his New Year's message on tackling the cost-of-living crisis.
Starmer's Pledge of 'All-Out War' on Living Costs
Facing a challenging political landscape with Labour trailing Reform UK in polls and anticipating heavy losses in May's local elections, the Prime Minister has vowed aggressive action. In a message published in the Daily Mirror on Friday 2 January 2026, he cited a moving letter from a nine-year-old Scottish girl describing the harsh realities of child poverty.
"The hunger from missing breakfast. The cold of unheated rooms. The embarrassment of a worn-through school uniform," Starmer recounted. He pledged that 2026 would be the year Britain "turns a corner," highlighting specific measures his government would take.
These include scrapping the controversial two-child benefit cap, expanding free school meals to half a million children, and implementing recent cuts to energy costs due in April. "We will wage an all-out war on the cost of living," the Prime Minister declared.
Political Reaction and Economic Reality
The new data has drawn swift criticism from political opponents. Richard Tice, deputy leader of Reform, accused Labour of having "lost control" over living costs. Criticism also came from within Starmer's own party. Labour MP Graham Stringer pointed to energy policies that he argued subsidise the "affluent middle class" for items like expensive cars and heat pumps, while inadvertently increasing bills for poorer families.
Nicholas Found of Retail Economics explained the underlying economic pressure, stating: "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."
As the Prime Minister attempts to instil a "sense of hope" for the coming months, these figures present a formidable obstacle, underscoring the deep-rooted challenge of translating policy into tangible financial improvement for the country's least well-off.
