Labour’s rising costs hit higher earners more

By the Editorial Team · Saturday, August 29, 2026

Higher-income households in the UK experienced a 2.8% rise in inflation in the year leading to June 2026, surpassing the 2.7% increase faced by lower-income families, marking a notable shift in cost-of-living trends. This change, linked to tax policies from the previous government and ongoing economic pressures, has contributed to heightened anxiety levels and prompted the current administration to implement relief measures such as VAT cuts on electricity and fare caps on public transport.

Higher earners in the UK are experiencing a greater rise in living costs compared to lower-income households, according to recent data from the Office for National Statistics (ONS). This marks the first time since March 2025 that wealthier households have faced higher inflation rates than poorer ones.

The data shows that annual inflation climbed by 2.8% for high-income households in the year leading up to June 2026, compared with 2.7% for lower-income households. In addition, working households encountered a 2.9% inflation rate, outpacing retirees who faced 2.5%. Although inflation rates fell for both workers and retirees between March and June 2026, the gap between these groups widened by 0.4 percentage points. Private renters experienced the highest inflation of any housing group at 3% annually, surpassing social renters and homeowners.

The findings coincide with separate ONS research highlighting a rise in anxiety levels among Britons since the Labour Party assumed government leadership earlier this year. Anxiety has increased to its highest point since December 2023, with young adults aged 20 to 24 and women reporting particularly elevated levels of concern.

The current trend follows policies introduced under former Chancellor Rachel Reeves, who called for the wealthiest to pay their "fair share" and implemented tax increases in the autumn 2025 Budget. These measures have been linked to the increased financial strain on higher-income households. Prime Minister Andy Burnham has pledged to provide relief to households facing cost-of-living pressures, promising a “breathing space” to ease financial burdens.

Critics argue that under Labour’s governance, the cost of living and doing business have increased, amplifying economic challenges. Shadow Chancellor Sir Mel Stride expressed the view that rising costs and growing anxiety are negatively impacting the population. Similarly, Anne Strickland of the TaxPayers’ Alliance pointed to ongoing pressures on working households, particularly renters and non-retirees, describing the cost-of-living crisis as far from resolved.

In response, a Treasury spokesperson highlighted measures undertaken by Chancellor John Healey since taking office, including the temporary removal of VAT on electricity bills for the winter, a 20% reduction in business rates for pubs, clubs, and live music venues set for next year, and a bus fare cap of £2 throughout 2027. These actions aim to alleviate financial pressures on families and businesses amidst the evolving economic landscape.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.