Families 'left £1,250 a year poorer by austerity drive'

A couple with two children will be £1,250 a year worse off by 2015 as families "shoulder the burden of austerity", a report suggests.

Researchers from the Institute for Fiscal Studies, commissioned by the Family and Parenting Institute, said the shrunken income reflected benefit cuts for those of a working age and the greater reliance on benefits by people with children than those without.

Lone, unemployed parents will be particularly badly hit, losing £2,000 of their annual income, a 12 per cent drop. The IFS report highlighted a "very real concern" as single parents face the challenge of finding a flexible job in a tough labour market as well as meeting childcare costs.

The report, The Impact of Austerity Measures on Households with Children, says incomes among homes with children are set to fall in real terms by 4.2 per cent between 2010-11 and 2015-16. The annual reduction in income of £1,250 for a couple with two children is "significantly" steeper than the 0.9 per cent drop felt across all households and the fall in income of £215 a year for couples with no children.

At least 500,000 more children will fall into absolute poverty between 2010-2011 and 2015-16, with most coming from households where the youngest child is aged under five. Homes with children aged under five face a 4.9 per cent drop in income by 2015-16, the report found, saying these tended to be households which relied more strongly on benefits than those without young children, who would see incomes grow more strongly when real earnings started to rise. Larger families will also be badly hit, mainly as a result of total benefits per family being capped from 2013-14. Families with three children are predicted to see their incomes fall by 6.8 per cent by 2015-16, while those with one child will see a 3.3 per cent fall.

Dr Katherine Rake, the chief executive of the Family and Parenting Institute, said: "These figures reveal the full extent to which families with children are shouldering the burden of austerity. Having children has always been expensive. But now many families with children face an extra penalty of more than £1,000."