Prime Minister Keir Starmer has placed the cost of living crisis at the absolute centre of his government's agenda for 2026, framing it as a year of "relentless" focus on putting money in people's pockets. However, this strategy is being criticised as a high-stakes political gamble that recycles taxpayers' own money rather than offering a genuine economic plan.
A Familiar Political Playbook
The emphasis on household finances is a well-worn path in British politics. Former Labour leader Ed Miliband found traction with a pledge to freeze energy bills, a move that prompted then-Chancellor George Osborne to enact a £50 cut. Similarly, ex-Prime Minister Rishi Sunak's first of five priorities in January 2023 was to halve inflation to ease the cost of living burden.
While inflation did fall, rising prices persisted and the pledge did little to salvage Sunak's popularity. Now, Starmer is deploying the same focus with heightened intensity. In a message to staff, he declared that "relentlessness" would define the year, with a constant drive on the cost of living, delivering tangible change, and narrating the country's transformation.
The Mechanics of the 'Recycle' Strategy
In practical terms, the government's approach has been labelled a form of "Milibandism." Chancellor Rachel Reeves used the recent Budget to announce a £150 annual cut to gas and electricity bills. This was achieved not by new funding, but by shifting the cost of subsidising low-income households from bills to general taxation.
Critics argue this is merely recycling taxpayers' money, taking it from them via taxes to return it as slightly lower bills. The same principle applies to the rail fare freeze. With more railways back in public ownership, this policy effectively uses money from all taxpayers to subsidise fares for a smaller, often better-off group of commuters, partly to help suppress the Consumer Prices Index.
A Precarious Political and Economic Bet
Analysts suggest these interventions are largely symbolic, providing cover for the core Starmer-Reeves strategy: hoping for stronger-than-expected economic growth, continued falls in interest rates, and wages rising faster than prices. The political risk is significant. Voters can recognise when they are being offered their own money, and such tactics rarely impress.
The gamble mirrors the situation in 2015, when a sharp rise in real disposable income preceded David Cameron's re-election. For Sunak, the opposite proved true. Starmer faces additional pressures, with net immigration likely lower than forecast—popular with many voters but unlikely to boost Labour while small boat crossings continue—and disability benefit costs rising faster than expected, squeezing the fiscal landscape.
With speculation that taxes may need to rise in Reeves's third Budget later this year, and the Prime Minister's domestic "focus" constantly disrupted by international events, the path is fraught. Economic forecasts are unpredictable, leaving roughly a 50 per cent chance that living standards will improve by year's end. For a Prime Minister some already describe as "in serious trouble," those odds represent a stark and risky wager on the nation's economic mood.
