Incoming Prime Minister Andy Burnham faces significant economic challenges as he prepares to take office, inheriting a downturn in living standards and rising unemployment following Sir Keir Starmer’s tenure. Official data from the Office for National Statistics (ONS) indicate that real household disposable income—a key measure of the money households have available after taxes and inflation—has declined by 0.5% since Starmer assumed office in July 2024. This suggests that, despite modest economic growth, families are generally worse off than when Labour took power.

While Labour points to a 1.6% increase in real GDP per capita during this period, economists argue that this figure does not fully capture the lived experience of households. The decrease in disposable income, which factors in tax changes and inflationary pressures, paints a more accurate picture of falling living standards. Tax increases, in particular, have contributed notably to this decline. Burnham has stated that his planned “devolution revolution” aims to generate equitable growth across all regions, but analysts remain cautious, especially given the uncertain economic fallout from the ongoing war involving Iran.

Unemployment has also risen, with the jobless rate climbing from 4.1% to 4.9%—the highest level since the height of the COVID-19 pandemic. This equates to roughly 300,000 more people out of work. The British Chambers of Commerce forecasts that unemployment could continue rising, especially among young workers, who are expected to be disproportionately impacted by a combination of tax changes and the increasing adoption of automation technologies like artificial intelligence. The number of young people not engaged in employment, education, or training (NEETs) has surpassed one million, reaching its highest point in over a decade. Alan Milburn, leading a government review on youth employment, has characterized this trend as a “national crisis” costing the economy an estimated £125 billion annually.

Labour’s fiscal approach under Starmer has seen a substantial rise in the overall tax burden, with projections indicating that taxes will account for about 38.5% of GDP by 2030, up from approximately 32% in 2010. This increase has been driven by measures including a £25 billion hike in employers’ National Insurance contributions and an extended freeze on income tax thresholds. These developments contrast with the party’s pre-election promises not to raise taxes on working individuals, creating political friction as Burnham signals a willingness to expand state control over essential services. He has highlighted plans to replicate Manchester’s bus franchising model nationwide and has indicated support for relaxing borrowing rules to finance broader public sector investments.

However, economic analysts caution that these strategies carry risks. Jefferies, an investment firm, expressed skepticism about the government’s ability to fund increased public spending without further tax hikes or efficiency cuts, warning that borrowing costs could rise and exacerbate the nation’s already substantial debt burden, which is nearing £3 trillion. The government currently spends around £100 billion annually on interest payments alone, underscoring the delicate fiscal position Burnham must navigate.

In summary, the Starmer administration leaves behind an economy marked by lower real incomes, higher unemployment, a soaring youth disengagement rate, and rising taxes. The incoming prime minister’s efforts to reverse these trends will be closely watched as Britain faces ongoing domestic and international economic pressures.