Life has become a whole lot harder for those families her government purported to serve. A couple with two children must now earn over £40,000 between them if they are to live comfortablyby / July 10, 2017 / Leave a comment
Almost a year ago today Theresa May stood on the steps of No 10 and pledged to put her government at the service of families who are “just about managing”: “I know you’re working around the clock, I know you’re doing your best, and I know that sometimes life can be a struggle.”
Twelve months on, it’s worth reflecting on that promise and asking how the millions of families in this boat are faring. The answer is emphatic: just managing is just getting harder. A working couple with two kids need to earn £20,400 each (over £40,000 between them) to reach the Minimum Income Standard, an annual barometer on living standards.
Based on what members of the public think you need to enjoy a decent standard of living, it covers the essentials but also the things you need to participate in society. An occasional meal out, a small birthday gift for someone in the family, a short self-catering break to the seaside.
Our analysis shows working parents have found it ever harder to reach this standard. This is despite a 4 per cent rise in the National Living Wage (NLW) and tax cuts from a higher personal tax allowance. Economic headwinds have caused the most damage, driving up the cost of living.
“With the Bank of England forecasting inflation will rise to 3 per cent this year and the welfare freeze beginning to bite, life is set to get even harder”
But a significant part of the problem has been made in Downing Street—more precisely, the former occupants in Number 11. The decision to freeze working-age benefits and tax credits in George Osborne’s 2015 Summer Budget are beginning to bite in their first year following the return of inflation, costing a working couple with two children on the NLW £415. The freeze is in place until 2020. To compound the problem, the Treasury claws back the lion’s share of gains from higher wages. For every extra pound earned, around 75p is typically lost by low earning families in additional tax and National Insurance payments and reduced tax credits.
It means families’ ability to meet their day-to-day costs has deteriorated. As well as a struggle to cover the bills—finding the weekly supermarket shop or filling up with petrol that bit more expensive—it’s the small moments of relief and fun that are sacrificed because the cash won’t stretch far enough: the after-school club, or swimming lessons have to go. As Becky, a working mum with a nine-year-old son from Leeds, puts it:
“Day-to-day expenses are just about manageable but when other things pop up—like school trips or when they need new uniform—it’s always ‘where am I going to get this money from?’ When Birthdays and Christmases come up, something which should be enjoyable is stressful because of the worry about finding the money. My wage only just about covers all my bills. By the end of the month, I’m lucky if I even have £50 left over.”
As events developed at a breathless pace in Westminster, life became a whole lot harder for the families May’s government purported to serve. The decision to call a snap general election found both the Conservatives and Labour wanting, failing to grasp these daily struggles and unable to offer a convincing programme which suggested things might change. It has left us in a political impasse, and the May administration in a much weaker position to deliver on the pledges made in that maiden speech as PM. Reports that the PM will tomorrow make a plea for cross-party working are welcome—but only if politicians on all sides can prove they actually understand the problems at hand.
With the Bank of England forecasting inflation will rise to 3 per cent this year and the welfare freeze beginning to bite, life is set to get even harder. Plans to cut the amount people could earn before losing tax credits caused an outcry during the last parliament and were reversed following a ferocious campaign. However, the same cuts have been built into Universal Credit—which will be replacing tax credits for more and more families over the next few years. The cuts cast a long shadow over prospects for low income working families with one earner.
Unless families can keep more of their earnings before their support is withdrawn, it will be very difficult to deliver the improved living standards for struggling families that have been promised. Brexit is sucking the oxygen out of economic and social reforms on the home front and despite the government deal with the DUP, political uncertainty hangs in the air. No party wants to go into an election with living standards falling. Yet that is the precisely the outlook for people who are just managing at best. The Autumn Budget may feel like a long time away, but it might be the government’s best hope of halting the slide.