Research has shown that there is a strong negative relationship between social spending and poverty levels. Among urban inequality researchers it is often assumed that, compared with the USA, the welfare state has mitigated social differences explaining lower levels of urban inequality in most European countries. However, research on the role of the welfare state is often conducted on the national level, and is thus unable to draw conclusions on the effects of social spending and redistribution on a lower level, failing to take the within-country variation into account. This study connects welfare state research to urban inequality research by investigating the effects of social spending on poverty in urban and non-urban areas. We have conducted a cross-national multilevel logistic regression analysis using Eurostat and European Social Survey data of 2008. Our findings suggest that the effects of social spending are unequally distributed within countries.