British families on low incomes are £2,300 worse off annually than their German counterparts, according to new research from the Resolution Foundation.
This difference is mainly due to the higher cost of living in the UK, which hits poorer families the hardest.
The study highlights that housing costs in Britain are 44 per cent higher than the average for other developed countries, creating a big financial strain on low-income households.
Simon Pittaway, Senior Economist at the Resolution Foundation warned “the crisis needs to be tackled urgently”.
He said: “Britain’s housing costs crisis is a major driver of child poverty, and contributes to poor families being £2,300 worse off than their German counterparts.”
Overall, prices in the UK are eight per cent higher than the average across other countries. This places Britain among the more expensive nations, though not as costly as Switzerland, which stands 47 per cent above the OECD average.
The study highlights that housing costs in Britain are 44 per cent higher than the average for other developed countries
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The impact is worse in the housing sector, where British costs soar 44 per cent above the OECD average, creating an outsized burden on household budgets.
Low-income families in Britain spend a significantly larger portion of their budgets on essential costs compared to wealthier households.
Families with lower incomes spend a larger portion of their money on housing and food compared to wealthier families. For example, those in the bottom half of income spend 22 per cent of their budget on housing, while those in the top half spend only 13 per cent.
Low-income families also spend 17 per cent of their budget on food, compared to 13 per cent for wealthier families. These spending habits make poorer households in the UK especially affected by high housing costs.
The income gap isn’t just between the UK and Germany—Dutch families with low incomes are 39 per cent better off than British low-income families, and French families in similar situations have eight per cent more income than those in the UK.
When we factor in the typical spending habits of low-income families, the gap between British and German households becomes even wider.
It grows from 16 per cent to 21 per cent. This means that poor German families have £1,700 more each year before considering these spending patterns, and £2,300 more after adjusting for them.
While some costs in Britain are lower, like food prices which are 12 per cent below the OECD average due to VAT exemptions, these savings are overshadowed by the high housing costs.
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Additionally, transport costs in the UK are 26 per cent higher than the average, but this affects poorer families less because they spend a smaller share of their budget on transport—11 per cent compared to 15 per cent for wealthier families.
These modest cost benefits fail to offset the substantial burden of housing costs, which remains the dominant factor in household expenses for low-income families.
Pittaway said: “Britain’s recent toxic history of low growth and high inequality has left low-to-middle income families far poorer than their counterparts in Western Europe.
“These damaging income gaps are even worse once we factor in the prices of goods and services that matter most to these families.
“While food and clothing are relatively cheap, the sky-high cost of housing – which accounts for almost a quarter of all spending by lower-income households – makes Britain a particularly pricey country for poorer families.
“Britain’s housing costs crisis is a major driver of child poverty and contributes to poor families being £2,300 worse off than their German counterparts. The crisis needs to be tackled urgently – from building more affordable homes to providing better support for low-income renters.”
