Poorest Brits now worse off than poorest people in Slovenia, report finds – here’s why
The poorest people in the UK are now poorer than poorest people in countries such as Slovenia and Malta, as living standards have plummeted due to welfare cuts and stagnating wages
In real terms, incomes in the majority of European regions have grown at a faster rate than the UK.
If the UK economy had continued growing at the trajectory it was before the financial crisis of 2008, UK households would have been nearly £2,000 richer every year.
NIESR researchers have also found that the British welfare system is among the least generous of developed countries.
The UK is third lowest for the value of benefits compared with average wages, when ranked with all 38 countries which are members of the Organisation for Economic Co-operation and Development (OECD).
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It ranks just above the United States and Australia. Luxembourg is at the top when it comes to the value of welfare in comparison to wages.
For spending on welfare, the UK is ranked at number 21. France, Finland and Denmark are the most generous countries.
Max Mosley, senior economist at NIESR and main author of the report, said: “The uncomfortable truth our report has uncovered is that economic stagnation over the past decade is now threatening the UK’s position as a place for a high standard of living.
“A combination of weak productivity growth driving near zero growth in real wages and cuts to welfare has resulted in a situation where we are neither delivering prosperity through high wages nor security through welfare.”
The report finds that the welfare payments do not cover the cost of essentials. It only covered the cost of essentials in two of the last 14 years. This was during the pandemic, because there was a £20 uplift to universal credit each week.
“That the poorest in our country now fare worse than those in nations once considered less affluent is a stark indictment of the UK’s economic social model. Reversing this decline will likely come to define the government’s growth agenda,” Mosley added.
NIESR is urging the government to ensure that benefits cover the cost of living with an ‘essentials guarantee’. It estimates that the cost of this would be £6bn but it would raise the incomes of the poorest households substantially and boost the economy by alleviating pressure on public services.
It also argues that the two-child limit and benefit cap should be abolished as the “most cost-effective way of reducing poverty”. Removing the benefit cap would cost around £2bn per year but would reduce the number of people living in poverty by 1.7 million, the NIESR claims.
NIESR experts additionally recommend that the government increase both public and private investment, particularly in training and skills, and that it establishes an institute focused on growth and productivity.
Professor Adrian Pabst, deputy director for public policy at the NIESR, said: “The government’s mission to grow the economy is not just about aggregate numbers but about higher living standards in every part of the country. Given the dramatic collapse in the living standards of the poorest 40% in society, it is vitally important to raise public investment in ways that unlock business investment to generate productivity increases and sustained real wage growth.
“The government should revisit its decision to delay the uprating of the personal income tax threshold until April 2028. After more than 15 years of real wage stagnation for millions, working families need to see a tangible improvement in their living standards over the duration of this parliament.”
