Sir Keir Starmer has staked his political fortunes on a promise to make tangible enhancements to UK family funds and ship “constructive change” for voters in 2026.
On a number of visits across the nation this week the prime minister will spotlight current insurance policies designed to ease the price of dwelling, beginning in Berkshire on Monday with the not too long ago introduced freeze in rail fares.
“This yr I’m going additional to deal with the price of dwelling,” he mentioned, noting his household’s monetary struggles as he grew up. “Each minute that we’re not speaking about the price of dwelling is a wasted minute.”
Conservative chief Kemi Badenoch mentioned the prime minister was mistaken to “anticipate gratitude”, since his authorities had imposed a collection of tax rises since profitable the 2024 basic election.
The place are the most important value pressures on households, and the way is the federal government looking for to handle them?
Housing
Ministers know that housing is the most important value for many households, whether or not by means of mortgages or hire. However additionally they know that the most important issue influencing housing prices is rates of interest, that are technically exterior their management.
In her November Price range, chancellor Rachel Reeves vowed that the fiscal occasion would “convey down inflation and supply speedy aid for households”. The federal government hopes decrease inflation will spur the Financial institution of England to chop rates of interest additional.
In December, the BoE minimize charges for the sixth time since 2024 to three.75 per cent, serving to decrease mortgage charges and progress in rental costs.
Annual UK hire progress slowed to 4.4 per cent in November, down from 5 per cent in October and properly under a close to all-time peak of 9 per cent in December 2024.
The studying marked the primary time in additional than two years that rents rose lower than wages, with earnings rising by an annual fee of 4.7 per cent within the three months to October.
Wage progress has additionally outpaced home costs. Nationwide’s home price-to-earnings ratio, a measure of affordability, fell to five.6 within the third quarter of 2025, the bottom in additional than a decade.
Martin Beck, chief economist at WPI Technique, mentioned he anticipated the development to proceed this yr, as “cooling inflation ought to enable actual wages to maintain rising whilst nominal pay progress slows, supporting housing affordability”.
The speed on a hard and fast two-year mortgage with 60 per cent loan-to-value dropped to three.9 per cent on common in November from a peak of 6.2 per cent in summer time 2023, in line with official knowledge.
However the common fee on the present inventory of mortgages hit 3.9 per cent in November, the best in additional than a decade, reflecting the cumulative influence of rates of interest rising earlier than 2024.
Labour has legislated to assist renters. Parliament not too long ago handed the Rental Reform act, which imposes new obligations on landlords, ends “no-fault” evictions and introduces minimal security requirements on rented houses.
The federal government has additionally introduced a number of reforms to the planning system designed to stimulate housebuilding, however they might take years to ship tangible change.
Vitality
From April family power payments will fall by £150 on common, primarily by the federal government’s shift in inexperienced coverage prices from tariffs to basic taxation, as introduced by Reeves within the November Price range.
However the Institute for Fiscal Research think-tank has instructed that these financial savings will likely be eroded over time by different rising power prices. In the meantime, Labour doesn’t look like on monitor to ship its election promise of a £300 minimize to family power payments by the top of the last decade.
Regulator Ofgem’s value cap, which limits how a lot power firms can cost houses on default tariffs per unit of fuel and electrical energy consumed, rose marginally to £1,758 in January from £1,755 between October 1 and December 31.
The determine is under the £2,500 energy price guarantee launched in 2022 that prevented common payments from surging even additional after wholesale costs spiralled.
Tomasz Wieladek, chief European macro strategist at funding firm T Rowe Value, informed the Monetary Instances’ annual survey of economists that “falling power costs, decrease inflation and decrease Financial institution fee in 2026” meant households “would most likely really feel extra snug with decreasing their financial savings”.
Meals
Meals inflation fell to a seven-month low of 4.2 per cent in November, down from 5.1 per cent in August and a multi-decade excessive of 19.1 per cent in March 2023. Grocery costs surged within the UK, as in lots of different international locations, following Russia’s full-scale invasion of Ukraine in 2022.
However they continue to be virtually 40 per cent above ranges in January 2021, affecting family sentiment, spending selections and inflation expectations.
Between July and September final yr, households spent extra on meals and drinks than in the identical interval in 2019. However they bought 1 per cent fewer items, reflecting the influence of upper costs.
Henry Prepare dinner, economist at MUFG financial institution, mentioned “considerations round elevated meals inflation and the implications for anticipated inflation have pale”, including to the case for the BoE to additional decrease rates of interest.
Forward of the Price range, Reeves promised motion to assist tackle excessive meals costs.
She promised a permanent reduction in enterprise charges for retail properties, implying that the businesses would cross on these financial savings to customers. However in actuality the reductions aren’t as beneficiant as people who had been in place for the reason that pandemic.
Transport
Rail fares in England will be frozen for the primary time in 30 years — till March 2027 — after a bounce of 5 per cent in early 2025, saving a whole bunch of kilos for passengers on a few of the busiest routes.
The measure applies to fares resembling season tickets, peak returns for commuters and off-peak returns between massive cities — however not for “unregulated” tickets resembling top notch and advance purchases.
Within the Price range Reeves additionally froze gasoline obligation, however solely between April and September this yr. Past that time, the momentary 5p minimize launched by the earlier Conservative authorities will likely be reversed in phases.
Ministers have additionally introduced a 3p a mile electrical automobile tax, to be launched from 2028.
Headline inflation and incomes
Inflation fell greater than anticipated to three.2 per cent in November, down from 3.6 per cent in October and properly under its 41-year excessive of 11.1 per cent in October 2022.
Analysts polled by Consensus Economics anticipate an additional decline this yr, taking inflation near the BoE’s 2 per cent goal by December.
Suren Thiru, economics director on the ICAEW, mentioned decrease power payments, meals and gasoline prices meant the UK would “now not be a world inflation outlier” by mid-2026.
Wage progress has continued to rise at a gradual tempo, helped by the rise within the nationwide dwelling wage. With slowing value progress, complete wage progress outpaced inflation uninterruptedly between mid-2023 and late 2025.
However Reeves’ Price range extension to the freeze in revenue tax thresholds will drag extra households into increased tax brackets and a few into paying the levy for the primary time. Unemployment can also be rising and set to rise additional as companies adapt to increased prices.
“The hole between pay progress and inflation will proceed to slender, the roles market is fragile, and the continuing threshold freeze signifies that taxes will proceed to eat into wage will increase,” mentioned Andrew Goodwin, chief UK economist at consultancy Oxford Economics.
