UK (Parliament Politics Magazine) – The National Institute of Economic and Social Research reports Britain’s economy has dropped in global affluence rankings due to stagnant wages and welfare cuts.
The latest report revealed that years of stagnant incomes and welfare cuts have caused the UK to tumble below Slovenia and Malta.
In a warning ahead of Chancellor Rachel Reeves‘ spring statement, the National Institute of Economic and Social Research urged ministers to protect welfare spending.
The institute stated that Britain’s reputation for high living standards is potentially declining.
What caused Birmingham’s districts to rank below Slovenia and Malta?
According to recent findings, districts in Birmingham were identified as the most impoverished in Britain, ranking below the least affluent regions of France, Finland, Slovenia, and Malta.
NIESR revealed that from 2020 to 2023, welfare cuts and slow income growth led the bottom 10% of earners in the West Midlands to see their living standards fall below those of Slovenia.
The report stated,
“UK regional income growth has been among the slowest in Europe, whilst real incomes in the majority of European regions have grown at a faster rate than those in the UK.”
How have welfare cuts and low productivity affected UK wages?
In its latest report, the NIESR urged policies aimed at poverty reduction and improving quality of life. It also criticized the current budget rules that restrict financial flexibility and hinder Britain’s economic growth and stability.
The study found that weak productivity growth was a major reason for nearly 50% of the stagnation, with nearly half of Britons affected, while tax and benefit adjustments worsened the situation.
A significant portion of the drop in living standards post-2008 can be attributed to a lack of growth.
The report shows that UK productivity has been hit harder than other industrialised countries. The productivity of the average UK worker is 20% lower than that of employees in France and Germany, and 30% less than in the US.
The institute estimates that aligning Britain’s productivity with the US could boost UK workers’ earnings by over £4,000 today.
How has the UK’s welfare system fallen behind OECD standards?
The document reveals that Britain’s position within the Organisation for Economic Co-operation and Development (OECD) places it in the middle range for welfare spending as a proportion of national income but third-lowest for the value of welfare compared to average wages.
The institute found that welfare payments were sufficient to cover essential costs in two of the last 14 years, both during the pandemic after a £20 per week boost in universal credit.
The report said that Britain has transformed into neither a high-wage nor a high-welfare country, leaving millions stuck between low wages and insufficient support.
What did Max Mosley say about the UK’s economic stagnation?
Max Mosley, a senior economist at the NIESR, stated,
“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.”
He added,
“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.”
How will Chancellor Reeves address welfare cuts in her spring statement?
Rachel Reeves plans to announce cuts to welfare benefits in her upcoming spring statement on March 26.
Despite a rise in government borrowing costs, she has confirmed that there will be no tax hikes or borrowing beyond the established budget limits.