But that 8% premium is an average, and some things are much more expensive than others. For example, food and drink is 12% cheaper in the UK than the OECD average (reflecting both supermarket competition and VAT carve-outs) while housing is a massive *44%* more expensive. - ThreadSky

simonpittaway.bsky.social • 52 days ago

But that 8% premium is an average, and some things are much more expensive than others. For example, food and drink is 12% cheaper in the UK than the OECD average (reflecting both supermarket competition and VAT carve-outs) while housing is a massive *44%* more expensive.

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simonpittaway.bsky.social•52 days ago

These price gaps play out differently across the income distribution, as poorer households spend more on essentials (like housing and food) and less on luxuries (like hospitality) than richer households.

simonpittaway.bsky.social•52 days ago

To make this more concrete, we can plot the UK price of goods and services (relative to the OECD average) against the extent to which they’re over-represented in poorer households’ spending baskets. Housing sticks out as both expensive and especially important to poorer families.

simonpittaway.bsky.social•52 days ago

It turns out that expensive housing outweighs cheap food, drink and communications (e.g. internet and phone bills) to make the UK an especially pricey place for poorer households.

This matters when comparing incomes here and abroad.

simonpittaway.bsky.social•52 days ago

Even with an aggregate PPP adjustment, there are big income gaps between poorer UK households and their counterparts in Western Europe. But if we use an income-specific PPP (i.e. weighting prices based on low- and middle-income spending baskets) these gaps widen further.

simonpittaway.bsky.social•52 days ago

For example, adjusting for the local cost of things that lower-income families spend money on, the 10th-percentile German household is £2,300 richer than its British equivalent. That gap is a third (34 per cent) larger than that implied by an aggregate price level adjustment.

simonpittaway.bsky.social•52 days ago

It’s a bit of a dead horse at this point, but these wider gaps between the UK and elsewhere are another reminder that our housing problem really is uniquely bad. It's good to see the Government taking this seriously – although action now needs to follow words.

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