Labour’s Fiscal Rules Are Crushing the Poor—And the Public Knows It

All UK families ‘to be worse off by 2030’ as poor bear the brunt, new data warns…

How do we measure a nation’s success when every metric points to decline?

Once upon a time, economists and politicians told us that GDP growth would float all boats. Now, as families across Britain sink deeper into financial quicksand, we’re discovering the cruel joke behind that promise. The measure of a truly successful economy isn’t abstract growth figures but the concrete reality of family prosperity—and by both standards, Labour’s economic stewardship is proving disastrously inadequate.

The Joseph Rowntree Foundation’s sobering analysis lays bare the truth that many families already feel in their bones: living standards for all UK households are set to fall by 2030, with the poorest experiencing a decline twice as severe as others. The average family will be £1,400 worse off; the lowest income families will lose £900 annually—a catastrophic 6% of their already stretched disposable income.

This grim forecast delivers a fatal blow to Keir Starmer’s first self-proclaimed “milestone” of “putting more money in the pockets of working people.” Rather than achieving this modest ambition, Starmer is on track to preside over the first government since 1955 to oversee falling living standards across an entire parliament. Some milestone indeed.

Chancellor Rachel Reeves, trapped in the prison of her “iron-clad” fiscal rules, now chooses to swing the axe at public spending rather than consider more equitable alternatives. Most perversely, the government seeks to extract £5 billion by cutting benefits for the vulnerable, including disabled people—a betrayal so profound it has sparked revolt within Labour’s own ranks.

The arithmetic of decline is brutally simple: by 2030, mortgage holders will pay approximately £1,400 more annually in interest, renters will surrender an additional £300 in rent, and average earnings will fall by £700. This triple blow falls most heavily on the poorest third of households, who remain disproportionately crushed between the millstones of rising housing costs, falling real wages, and frozen tax thresholds.

As Alfie Stirling of the JRF rightly observes, “It is wrong, and ultimately counterproductive, to try and rebuild the public finances through cuts to disability benefits.” The alternatives exist—tax reform targeting those with “the broadest shoulders”—but require political courage this government evidently lacks.

The JRF offers a clear path forward through immediate action, medium-term planning, and systemic tax reform. Their recommendations include reversing cuts to disability benefits, establishing a “minimum floor” in Universal Credit, unfreezing Local Housing Allowance, and reforming the tax system to ensure returns on wealth are taxed equivalent to earnings from work. These measured, practical solutions stand in stark contrast to the government’s slash-and-burn approach.

Britain Needs Radical Change, Not More Cuts

But perhaps what Britain truly needs extends beyond even these sensible proposals. As Labour Heartlands boldly suggests, we need a government that “dares to dream”—that embraces the radical vision of building a new city fit for the 22nd century, a transformative national project that could employ every trade, house the homeless, and revitalise our gutted industrial heartlands.

The predictable chorus of fiscal hawks will screech about costs, but their objections reveal profound economic illiteracy. Britain is a sovereign nation that issues its own currency. The principles of Modern Monetary Theory remind us that such a country’s spending constraints are not financial but real—inflation and resource availability, not arbitrary debt ceilings or deficit targets. The question isn’t whether we can afford to build our future, but whether we can afford not to.

Leading economists have warned that it would be a “profound mistake” to cut spending or investment, stating plainly that “the UK cannot cut its way to growth.” Yet this administration seems determined to prove that austerity, even when rebranded, remains their default response to economic challenge.

Local governments, already starved of resources after suffering real-terms cuts exceeding 45% since 2010, now brace for further punishment. As services for the most vulnerable teeter on the edge of collapse, the promise that Labour represents anything other than austerity-lite rings increasingly hollow.

The public has noticed. Neither Starmer (-32%) nor Reeves (-38%) commands economic trust, with voters marginally preferring the Conservatives on economic management and financial improvement—a damning indictment after just eight months of Labour government.

While Treasury spokespeople tout modest wage increases and interest rate cuts, the everyday reality for millions tells a different story: energy bills climbing, local services disappearing, and household budgets stretched beyond breaking point.

The neoliberal economic model—embraced rather than challenged by Labour—continues its death spiral, benefiting few while immiserating many. What Britain desperately needs is not minor tinkering but the transformative vision that Labour Heartlands advocates—a national project of renewal and reconstruction that could break us free from decades of economic stagnation.

Until our leaders measure economic success by the security and prosperity of ordinary families rather than by abstract indicators or fiscal rules, we remain trapped in this dismal cycle of decline—only now with a red rosette pinned to our collective misery.

Paul Knaggs