The poorest 10% of households in the UK are now poorer than the poorest 10% in Slovenia and Malta, according to the National Institute of Economic and Social Research (NIESR). The opposite was true in 2005, showing growth in living standards in less developed countries, further confirming that – shocker – neoliberalism is not a remedy to late-stage capitalism in the UK. Crucially, though, what hasn’t been widely reported from the NIESR report is the international comparisons to the UK’s Department for Work and Pensions (DWP).
The new report comes as a warning to chancellor Rachel Reeves to step back from proposed £6bn DWP disability benefit cuts and improve incomes in her spring statement later in March.
DWP myth busting
In comparison to the 37 other OECD countries, the UK already ranks the third lowest for ‘welfare value’, which is DWP spending as a percent of average wages. The only two countries lower are the US and Australia. Further, it scores in the middle of OECD countries for welfare (DWP) spending as a percent of GDP. And that’s a drop from the 14th largest welfare spender in 2010 to the 21st in 2019.
The NIESR also accused governments of cutting DWP welfare more than was even necessary post-2008. The UK also had the third-lowest ‘replacement rate’ – that is, what benefit rates were as a percentage of average wages (again, behind the US and Australia). The NIESR also criticised Universal Credit, for setting benefits rates that were not based on ‘need’ – leaving people (specifically children as it noted) in poverty.
And overall, the NIESR said that government’s DWP welfare ‘reforms’ were designed:
to reduce the welfare bill… not by reducing the financial value of welfare, but by pushing people off welfare quicker through stricter conditionality.
So the idea paraded in the right-wing and even liberal press that Britain’s benefit spending is very high, doesn’t stand up to comparison. The Daily Mail recently asked if Labour “now have the resolve to slash billions from sicknote handouts?”
Yet the NIESR report shows that this isn’t remotely necessary, especially in a country so dramatically unequal in terms of wealth.
Shoddy incomes
When it comes to income growth, the UK has seen some of the slowest in Europe, the NIESR states. From 1955-2007, real wages grew by 2.6% per year. But since the financial crisis that has slumped to 0.6%. The Trades Union Congress (TUC) found such a wage slump has resulted in the average worker losing £14,800. And the OBR estimated that the 2022-23 years saw the largest fall in living standards since records began in the 1950s.
The UK’s stark inequality is highlighted in the NIESR report, not least because of the lacklustre support from the DWP.
The poorest region in the UK ranked p10 193/269 compared to others in Europe, while the poorest region in Germany ranked 82. This isn’t a surprise when the Fairness Foundation showed in October last year that gap in absolute wealth between the poorest 10% and richest 10% skyrocketed by 48% from 2011 to 2019.
In 2011, the richest 10% held £7.5 trillion in wealth and by 2019 that had increased to £11 trillion. The wealthiest 1% owns not far off half of these figures. By contrast, the poorest 10% went from £12bn in debt to £11bn in debt during that time. Yet the NIESR research shows that countries like Finland experienced progressive growth in the incomes of the nation’s poorest 10% over the past few decades, as well as Slovenia and Malta.
Senior economist at the NIESR Max Mosley 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.
Yet despite all of this, the Labour government intend to cut DWP welfare for countless disabled people. That is economically illiterate – and morally repugnant.
Featured image via the Canary
