Since the Labour government, led by Chancellor Rachel Reeves, rolled out its economic policies in late 2024, the UK has witnessed a troubling surge in food prices that’s hitting households hard. While Labour promised to make work pay and stabilise the economy, their tax increases and minimum wage hikes are being widely blamed for driving up the cost of living—particularly when it comes to the price of food. Let’s break down the numbers and examine how these policies are affecting everyday Brits.
In her October 2024 Budget, Reeves announced a 6.7% rise in the National Living Wage, pushing it from £11.44 to £12.21 an hour starting April 2025. Alongside this, she increased National Insurance Contributions (NICs) for employers, a move dubbed by critics as a “tax raid on businesses.” The intent was to boost workers’ incomes and fund public services, but the ripple effects have been far less rosy. According to the British Retail Consortium (BRC-NIQ) Shop Price Index, food inflation has now climbed to 2.8% in May 2025, up from 2.6% in April. Fresh food inflation has seen an even sharper rise, jumping to 2.4% compared to 1.8% the previous month. This marks the fourth consecutive month of rising food prices, a trend that industry experts and businesses are directly linking to Labour’s policies.
The mechanism here is straightforward but brutal. The hike in the minimum wage, while a win for low-paid workers on paper, has significantly increased operating costs for businesses, especially in labour-intensive sectors like retail, hospitality, and food production. On top of that, the higher NICs have added further pressure, with some estimates suggesting that the combined impact of these measures has raised the cost of hiring by as much as 5-7% in real terms for 2025–26. Businesses, unable to absorb these costs amid already tight margins, have little choice but to pass them on to consumers. As a result, the price of a weekly shop is climbing steadily, with fresh goods like meat, vegetables, and dairy bearing the brunt of the increases.
The economic backdrop only makes things worse. Inflation, which had been expected to stabilise, bounced back to 3.5% in April 2025, driven in part by these same tax and wage policies. The Office for Budget Responsibility (OBR) had already warned in March 2025 that higher wage growth and elevated input costs—exacerbated by Labour’s measures—would push inflation to a quarterly peak of 3.7% by mid-2025. This isn’t just a blip; it’s a sustained trend that’s eroding purchasing power. Posts on X reflect growing public frustration, with many users pointing fingers at Reeves’ “reckless tax raid” for hammering businesses and, by extension, household budgets.
Reeves has claimed the economy is “beginning to turn a corner,” pointing to stronger-than-expected GDP growth of 0.7% in early 2025, driven by consumer spending and business investment. But this optimism feels hollow when juxtaposed against the reality of rising costs. Consumer spending might be up, but so is borrowing—government borrowing hit £20.2 billion in April 2025 alone, raising fears of further tax rises later this year. The International Monetary Fund (IMF) has even urged Reeves to loosen her fiscal rules to avoid emergency spending cuts, a sign that the government’s financial strategy is on shaky ground.
What’s particularly galling is how predictable this was. Businesses warned last year that higher NICs and wage mandates would force them to raise prices. A survey from March 2025 found that 56% of firms with ten or more staff were planning to offset these costs by increasing prices, and we’re now seeing that play out in supermarket aisles. The Labour government’s narrative of “making work pay” is cold comfort to families who are paying 2.4% more for fresh food than they were a year ago, with no sign of relief in sight.
Critically, this approach ignores the broader economic dynamics at play. The cost of living crisis, already a defining issue for Labour as noted by No. 10 strategists, is being exacerbated by these policies, not alleviated. While the minimum wage increase might put a few extra pounds in workers’ pockets, the corresponding rise in food prices—coupled with inflationary pressures on rents and energy—means that real disposable income is shrinking for many. This is the spectre of stagflation rearing its head: rising prices without corresponding economic growth or wage gains that actually keep up.
Reeves and the Labour government need to take a hard look at the unintended consequences of their policies. Championing workers’
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