“The true test of any Budget is whether it lifts real incomes and improves living standards for ordinary people.”
By Andy McDonald
The true test of any Budget is whether it lifts real incomes and improves living standards for ordinary people. On that measure, this week’s Budget makes important progress on child poverty, which I welcome.
But it leaves the broader challenge of reversing a decade of wage stagnation and rising living costs largely unaddressed.
There are genuine steps forward. Ending the two-child cap is a moment of real policy action that will materially change people’s lives. For too long, successive governments—including Labour’s recent predecessors—treated child poverty as an unfortunate inevitability.
By scrapping the cap, this government is finally lifting hundreds of thousands of children—including almost 6,000 in my constituency of Middlesbrough & Thornaby East—out of poverty. That deserves recognition.
Other measures point in the same direction: raising the national minimum wage, boosting pensions through the triple lock, reducing household energy bills, and freezing rail fares. These interventions show that the government understands the pressure on household budgets and is trying to ease it.
But easing pressure is not the same as raising living standards. A decisive test of this government’s commitment is whether it will restore pay across the economy. The minimum wage rise is welcome, but without a wider strategy for both public and private sector pay, most families will see only marginal gains.
After fourteen years of stagnation under Conservative governments, working people need more than stop-gap relief—they need sustained growth in their earning power. That requires public sector pay settlements workers can support, and it requires delivering the Employment Rights package unions need to secure fair pay.
I remain concerned that the government now appears unwilling to introduce day-one rights for unfair dismissal, and I urge Ministers not to dilute these protections during consultation or in future secondary legislation.
On tax, there are progressive moves alongside some significant concerns.
The government has taken steps to tax wealth—on dividends, savings, property income, and through a high-value council tax surcharge. These are positive signals, but they are partial.
They raise nowhere near the revenue required to rebuild the public services working people rely on. If the government is serious about fairness and resilience, it must be bolder.
This is especially relevant when set against the decision to freeze income tax thresholds, which will drag millions into higher rates. By 2030, more than 700,000 people will start paying income tax for the first time, and nearly one million will enter the higher-rate threshold—while only around 4,000 will move into the additional rate.
This effectively shields the highest earners while increasing the burden on ordinary workers. The policy should be reversed before it takes effect.
Independent assessments from the Office for Budget Responsibility, the Institute for Fiscal Studies, and the Resolution Foundation underline the scale of the challenge. Even with the Budget’s measures, real household disposable income is set to fall over the course of the parliament. That is a damning verdict. A Labour government that cannot protect and grow working people’s incomes risks losing credibility with those it seeks to represent.
In many areas, the direction of travel is positive: abolishing the two-child cap, increasing the minimum wage, uprating pensions, providing energy support, and freezing rail fares all help. But taken together, they do not yet do enough to transform lives.
The government must go further—restore pay, reverse regressive tax decisions, and fully harness wealth taxation to fund public services.
This parliament will ultimately be judged not by the Chancellor’s fiscal presentations but by whether living standards rise. Lifting children out of poverty, supporting households with energy and transport costs, and signalling that wealth should contribute more are important steps.
But they are only a foundation. A Labour government must act decisively to deliver real, lasting improvements to working people’s lives. Anything less would cement the squeeze on wages, living standards, and public services—and undermine Labour’s credibility at the moment it is most needed.
- Andy McDonald is the Labour MP for Middlesbrough & Thornaby East. You can follow him on Twitter/X, Facebook and Bluesky.
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