Last Updated:March 17, 2025, 09:31 IST
Despite Britain’s ranking as the world’s sixth-biggest economy, inequality between the country’s rich and poor regions had worsened since the 2008-09 global financial crisis
The International Monetary Fund data showed that the US is per capita-wise nearly 40% wealthier than the UK. (AFP File Photo)
Britain is no longer a rich country. According to a study conducted by a think tank, some of the poorest households in Britain are worse off than those in Slovenia and Malta.
The National Institute of Economic and Social Research (NIESR) said despite Britain’s ranking as the world’s sixth-biggest economy, inequality between the country’s rich and poor regions had worsened since the 2008-09 global financial crisis.
“The poorest households in Slovenia and Malta are now better off than those in the UK,” the report states, attributing this decline to stagnating real incomes since the 2008 financial crisis. While other European countries have seen steady income growth, the UK has fallen behind.
What Does The Report Say?
According to the report, the UK ranks among the least generous welfare providers in the OECD. It says:
• The UK sits in the middle of OECD nations in terms of welfare spending as a percentage of GDP.
• It ranks third lowest for welfare value, measured as a percentage of average wages.
• Welfare payments have only covered essential costs in two of the last 14 years, with the exception of the pandemic-era Universal Credit uplift of £20 per week.
The report describes the UK as “neither a high-wage nor high-welfare country”. Weak wage growth and cuts to welfare spending have restricted the two main sources of living standards.
Productivity stagnation has significantly impacted salaries. If the UK wages had grown at the same pace as in the US post-2008, British workers would be £4,300 richer per year.
The report also highlights that:
• Productivity weakness has directly contributed to wage stagnation over the past 15 years.
• Countries with stronger productivity growth throughout the 2010s saw the highest wage increases.
NIESR said while Britain’s poorest 10% might be better off in terms of cash than their counterparts in Slovenia and Malta, they fell behind once Britain’s higher cost of living was taken into account.
Wages In The UK
Living standards in parts of Birmingham and the northeast of England are worse than the most impoverished parts of Slovenia and Lithuania, The Telegraph, quoted the study, as saying.
NIESR economist Max Mosley said the average British worker would be £4,000 (Rs 4.5 lakh) per year richer had growth and wages in the UK kept up with the US.
“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,” Mosley told The Telegraph.
The data from International Monetary Fund (IF), as quoted by INews, showed the US is now, per capita-wise, nearly 40% wealthier than the United Kingdom.
Poland too is touching the UK’s benchmark. In 2010, the average Briton had 177% of the wealth of the average person in Poland. In 2024, that figure had reduced to 121%.
The study says the value of welfare payments in Britain had been below the cost of household essentials in 12 of the last 14 years — with the only exceptions being in 2020 and 2021 thanks to a temporary welfare boost during the Covid-19 pandemic.
What Experts Say?
The think-tank said by removing Britain’s two-child policy for additional welfare benefits could be the most effective way to reduce poverty.
Cuts to value-added tax rates would also give a disproportionate boost to low-income households as they spend a bigger share of their income on essentials, it said.
UK Chancellor Rachel Reeves is reportedly considering cuts to welfare benefits as she prepares for a half-yearly update on the public finances on March 26. It is expected to show her off course to meet her rule to balance day-to-day spending with tax revenues by 2030.
As a piece in INews by Mark Wallace, noted, “We can all sense that something is wrong. We pay record rates of tax, borrowing continues to run even higher than the budgeted deficit, and yet simultaneously the state — transport, policing, health services — seems not to work. It doesn’t add up.”
Wallace said that Britain is no longer as rich as citizens think – which is a deadly combination.
“Lacking wealth is a serious problem: it lays you open to crises; it weakens your capacity to overcome new challenges, such as defence threats or climate change; and it restricts your options at every turn. Witness the Government, choosing between winter fuel allowance and public services, or between defence and international aid,” Wallace wrote.
Meanwhile, a piece in The Guardian said, “Having sold off our public assets, and hollowed out the state’s capacity to directly deliver services and infrastructure, we now rent our public services from the foreign entities that own our buses, water companies, energy networks, prisons, care homes, and provide us with the IT services needed to run the state. There is also a bitter irony that some of these foreign entities are actually state-owned enterprises.”
“Arguably the most dangerous aspect of the orthodox approach to economic development has been its wilful negligence of dangerous levels of inequality. Not only did countries that pursued these economic policies become more unequal but there was also active collusion between political and economic elites to further rig the rules to their mutual benefit,” the piece stated.