The real rise in British families' cost of living: 20 per cent

The cost of maintaining an acceptable standard of living has soared by up to a fifth for families in the past year, according to research published today.

Families with children have been hit much harder by the Coalition's public spending cuts than other households, the Joseph Rowntree Foundation said. A couple with two children now needs to earn at least £18,400 each if both work full-time, according to the social research charity.

This is because child benefit has been frozen and tax credits reduced, in particular those that help low-income families to meet their childcare costs.

Income requirements for other groups have not risen so fast over the past 12 months. The wages needed by a single person with no dependants have actually risen by less than inflation, once the increase in the personal tax allowance in April has been taken into account. A single person now needs £15,000 a year to meet the minimum income standard.

Pensioners, meanwhile, should have an income close to their minimum requirement, the foundation says. However, that is only as long as they claim all the benefits they are entitled to. A pensioner couple now needs to spend £233 a week on essentials, net of rent or a mortgage.

The author of the report, Donald Hirsch, of the Centre for Research in Social Policy at Loughborough University, said: "The squeeze in living standards caused by the combination of rising prices and stagnant incomes is hitting people on low incomes hard. This is partly because the prices of certain essentials like food have risen, but also because of policy decisions that have reduced what families have to live on."

He said that, in particular, the reduction in support for childcare has made many low-earning families worse off. "In the process, for families who need to use childcare, it has substantially reduced the incentive to work on relatively low pay," Mr Hirsch warned.

Over the past decade, the cost of a minimum basket of goods and services has climbed by 43 per cent, compared to a 27 per cent increase in the Consumer Price Index. The minimum income standard for Britain was first calculated in 2008.

The latest Legal & General MoneyMood survey shows 1.3 million families are worse off than they were nine months ago. Twelve million of the UK's 21 million households now spend all their money on bills and debt payments, up from 10.7 million nine months ago. The rise leaves 57 per cent of households on a fine balance between managing to pay bills and sinking into debt, compared to 51 per cent in September.

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