UK falls in standards of living

LONDON: Britain has plunged down a league table measuring international standards of living.

In a sign of the hard times facing families, the Office for National Statistics said the UK has dropped from fifth in 2005 to 12th in 2011.

The league table of the world’s wealthiest nations, using the latest available official figures, is based on how much money households have after paying their taxes and what they can afford to buy with their spare cash.

While Britain used to be beaten only by America, Luxembourg, Norway and Germany, it is now trumped by a much longer list of countries including Switzerland, Australia, France, Belgium, Sweden and Canada.

While average incomes have risen in Britain, they have increased by more in rival nations. At the same time, the price of goods has risen by a higher margin in Britain — meaning we can buy less with our salaries compared to people in other countries.

The ONS’s research is based on what it calls each person’s “actual household disposable income”. This is defined as their total income — not only their salary but also other items such as interest on their savings — minus their tax bill.

It also includes the value of any free ‘benefits’ received from the Government, such as NHS treatment and education. But the total figure is then adjusted to take account of the prices of goods and services in each country.

In Britain, the average disposable income for 2011 is given as £18,291 (Dh102,000), which has risen slightly from 2005 when it was £17,069.

But in other countries it has risen much faster, pushing the UK down the league table as it has been rapidly overtaken.

Based on research by the Organisation for Economic Co-operation and Development, which measures economic and social well-being around the world, the ONS report said the UK’s downfall was primarily fuelled by the collapse in the ‘purchasing power’ of households.

The ONS said: “Between 2005 and 2011, the price of goods and services in the UK has increased relative to other countries.

“As a result, although household income in the UK has grown, when compared to other countries that income doesn’t stretch so far. This goes some way in explaining why the UK ranks relatively lower than it did in 2005.”

It comes as a separate report, from the Halifax bank, warned that millions of families are “at full stretch financially” and are being hit by a “squeeze” forcing many to “cut back where they can”.

Around one in two “admitted they would find it difficult to cope if their monthly outgoings increased by up to £99”.

Others are even more hard-pressed, with their finances so finely balanced they would be tipped over the edge with just a £24 increase in monthly bills.

Anthony Warrington, director of personal current accounts at Halifax, said: “Rising prices are putting disposable income under increasing pressure.”