Janice R. Andrews
A shocking report by the National Institute of Economic and Social Research (NIESR) reveals that parts of the UK are now worse off than the poorest areas of Slovenia and Malta, challenging Britain’s status as a “rich” nation. Decades of stagnant living standards, slow wage growth, and rising inequality have left the UK’s most vulnerable populations struggling to keep up with the cost of living.
Despite being the world’s sixth-largest economy, the UK has seen far slower improvements in living standards compared to less developed European nations. If UK wage growth had matched the US over the past 25 years, incomes would be £4,000 higher today. Instead, sluggish productivity and high immigration-driven population growth have hindered per capita GDP rises.
The report highlights that while the UK’s poorest 10% are better off in cash terms than their counterparts in Slovenia and Malta, they fall behind when the higher cost of living in Britain is factored in. Tight welfare rules and below-average benefits spending compared to wages have exacerbated the crisis. Welfare payments in the UK have failed to cover household essentials in 12 of the last 14 years, with only temporary pandemic boosts providing relief in 2020 and 2021.
Rachel Reeves, the Chancellor, faces mounting pressure as she plans to cut £5 billion from benefits while balancing the budget. Labour MPs have criticized the move, warning it could deepen poverty. Meanwhile, public services like the NHS remain less productive than pre-pandemic levels, despite increased funding and staffing.
Max Mosley, a senior economist at NIESR and the report’s author, warned that the UK’s economic stagnation threatens its reputation as a high-standard-of-living country. “The poorest in our country now fare worse than those in nations once considered less affluent,” he said, calling it a “stark indictment” of the UK’s economic model.
To address the crisis, NIESR recommends lifting the two-child limit on welfare benefits and cutting VAT rates, which would disproportionately benefit low-income households. As the Chancellor prepares to deliver her Spring Statement on March 26, the report underscores the urgent need for policies to tackle inequality and revive the UK’s economic standing.
The findings serve as a wake-up call, highlighting the growing divide between the UK and its European neighbors and the pressing need for systemic change to restore prosperity.
