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Working families need £36,800 minimum income
Working families with children are being dealt a damaging triple financial blow in the recession, according to a new report published by the Joseph Rowntree Foundation.
Working families with two children need a minimum of £36,800 to have an acceptable standard of living, according to a new report published by the Joseph Rowntree Foundation (JRF).
Since 2008, JRF’s Minimum Income Standard for the UK (MIS) has tracked what members of the public think people need to have a socially acceptable standard of living, and how much money this means different households (working age people with and without children and pensioners) need to reach this standard.
Soaring childcare and transport costs have combined with cuts to tax credits to hit families hardest, it says. It calculates that the minimum that a couple with two children now needs to earn for an acceptable standard of living is £36,800. JRF says this figure has risen by nearly a third since 2008, twice the rate of inflation. It caculates the figure for a lone parent with one child as £23,900.
Its report finds that couples with two children have been hit in three areas:
– Childcare: minimum costs have risen by nearly a third, says the JRF. In 2008, child minders outside London charged on average £2.70 an hour; now they charge £3.50. Childcare is now families’ single biggest weekly outgoing, it states.
– Transport: bus travel has doubled in price since the late 1990s which, combined with cuts to public transport, means families with children now deem a car as an essential for the first time, says the report.
– Tax credits: the report says cuts to tax credits have increased earning requirements substantially, more than cancelling out the benefit of higher income tax thresholds.
The research has found a quarter of the UK’s population live below MIS – 3 million more than in 2008.
Despite the squeeze, the public have not fundamentally changed their views of what is necessary to have an adequate standard of living, says the JRF. However, the research shows that people are being thrifty. For example, people said households can cut back on exchanging gifts and shopping around for deals and vouchers when eating out, and still achieve an acceptable minimum.
Julia Unwin, Chief Executive of the JRF, said: "Families have a monumental task trying to earn enough to get by. Parents facing low wages and pressure on their working time have little prospect of finding the extra money they need to meet growing household expenses.
"This year’s research shows that a dangerous cocktail of service cuts and stagnating incomes are being keenly felt by parents. Many working people face the risk of sliding into poverty. It illustrates how anti-poverty measures are needed to address not just people’s incomes but also the costs that they face."
Donald Hirsch, co-author of the report, added: "People are being more modest in terms of what they think needs to be spent on participating in society, but this thrift has been outweighed by rising costs. Parents have not changed their view of most needs, including a nutritious diet and participation by children in activities vital for social inclusion. What has changed is the ability of many families to afford such essentials."
The research also says that the level of Universal Credit in 2013 will strongly influence the ability of households to reach MIS.
Chris Goulden, Programme Manager for Poverty at JRF, said: "Work is vital for families to achieve a minimum acceptable standard of living. However, the National Minimum Wage combined with in-work benefits leave families well short of reaching this standard. It is harder to make ends meet because of the rapid rate benefits and tax credits are reduced as earnings rise. Addressing this will need a major effort both to improve wages and to ensure that in-work benefits do not trap families below an adequate living standard."
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