Living standards in UK have lagged behind those in Germany and US for years
High inflation is on everyone's minds as the world's wealthiest gather at Davos, Joel Hills reports
High inflation leaves everyone feeling worse off, even the well-heeled here in Davos.
At a time of high inflation, it’s natural that we become concerned about falling living standards. However, the living standards in the UK have been falling relative to the countries we like to compare ourselves to for years.
According to new analysis by the Resolution Foundation, the latest data shows that the typical UK household has an annual disposable income, when adjusted for inflation, of £20,044 a year.
The typical French household is 11% richer, the typical German household 27% richer and the typical US household an extraordinary 64% richer than the typical family in the UK.
And the gap in prosperity between “us” and “them” has been widening ever since 2009.
The reason we have been falling behind our international peers has more to do with weak economic growth than high inflation.
The financial crash hit the UK particularly hard as we have a large financial services sector. And the evidence strongly suggests that Brexit has had an negative impact on business investment and trade.
The Resolution Foundation points out that Britain also has an unusual distribution of income. While the rich in the UK are wealthier than the rich in most other European counties, those on middle and lower incomes in the UK are poorer than most of their European counterparts.
Krishan Shah, Economist at the Resolution Foundation, said: “We urgently need to get serious about both boosting economic growth and lowering inequality, if middle Britain is to enjoy the level of living standards that many other Europeans take for granted.”
Low economic growth is a serious political problem. Governments which can’t raise the living standards of their citizens tend to run into trouble.
The question of how to revive Britain’s growth rate has been a political issue ever since 2010 but it’s proved difficult to deliver in practice.
Liz Truss believed cutting taxes was the answer but, in doing so, succeeded only in triggering chaos in financial markets.
The business minister, Grant Shapps, believes more investment in the UK by businesses is the solution and he’s here at the World Economic Forum trying to encourage multinational companies to do just that.
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