The amount of money people in the UK need to live a decent life has risen faster than the official rate of inflation over the past decade implying that the real squeeze on families has been even greater than previously recognised, according to new research.
Since 2008 academics at the Centre for Research in Social Policy at Loughborough University have looked at what people say they need in order to have an acceptable quality of life, known as a “minimum income standard” (MIS).
And their work, commissioned by the Joseph Rowntree Foundation, shows that, while inflation as measured by the Consumer Prices Index has risen by 25 per cent over that period, the MIS has increased by more than 30 per cent.
For working-age adults without children MIS costs are up 35 per cent since 2008, by 30 per cent for a couple with two children and by 50 per cent for a pensioner couple.
The researchers said that the disparity between the Consumer Price Index and the MIS measure was due to essentials such as food and transport rising faster in the latter.
The researchers also pointed out that these rising living costs implied that the effective squeeze due to benefit cuts since 2010 was even greater.
“Unless the freeze on tax credits is lifted, this squeeze is likely to continue,” said Professor Donald Hirsch, director of the Centre for Research and Social Policy.
Recent work from the Institute for Fiscal Studies had suggested that median UK incomes rose 1.6 per cent a year in the five years after 2011, which was actually quicker than in the five years after 2002.
However, even on these figures the recovery in median incomes was much slower than in the wake of the recession of the early 1980s.
Despite easing back on the departmental spending cuts previously pencilled in before the 2017 general election, Theresa May’s Government has pushed ahead with the planned welfare spending cuts, many of which will fall on low-income working families.
The Joseph Rowntree Foundation wants the Universal Credit “work allowance” – the amount someone can earn before their benefits start to be withdrawn – to be made more generous to compensate.
“Some working parents are actually further away from reaching a decent living standard because tax credits to top up low wages have been falling at a time when families need them most,” said Campbell Robb, the JRF’s chief executive.
“The Government must put things right by allowing families to keep more of their earnings. This would ease the constraints the crippling cost of living places on their ability to build a better life and ensure everyone can reach a decent standard of living.”
The new research suggests the minimum household budget necessary for an average couple with two young children (excluding rent and childcare) is £480 a week. For a single parent with two young children it is £490 a week. A single person is deemed to need £214 a week and a pensioner couple £302 a week.
The percentage of the MIS of a lone parent with two children covered by benefits in 2008 was 68 per cent. This year that proportion is down to 60 per cent, again reflecting benefit cuts over that period.
The MIS is used to calculate the unofficial “living wage”, used by many groups and some employers to estimate the average real cost of living.
“The financial pressures created by the rising costs of childcare, transport and housing are placing a huge stress on families – and particularly the millions of people still earning less than the wage they need to make ends meet,” said Tess Lanning, director of the Living Wage Foundation.
“Tackling this issue requires more responsible employers to take a stand by committing to pay their staff the real Living Wage based on what people need to get by, not just the government minimum."
The items going into the MIS “basket”, according to researchers, have remained broadly stable over the past decade and include food, clothing, home heating and a low-cost, one-week holiday in the UK – and being able to give presents.
However, technologies such as smartphones and broadband are also now included, unlike in 2008.
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