Rising inflation will combine with crippling benefits cuts to push more children into poverty—unless the Chancellor acts in his autumn budgetby / August 21, 2017 / Leave a comment
In normal times, inflation holding steady goes a long way to protecting the living standards of ordinary families. But these are not normal times.
For the first time in the post-war period, the rising cost of essentials has not been accompanied by any increase in state support given to families with children. Between 2012 and 2019 benefits will have risen by only 3 per cent, while prices are projected to rise by 12 per cent.
New research for Child Poverty Action Group, “Cost of a Child in 2017” by Professor Donald Hirsch, looks at whether families can afford to bring up children to a minimum standard of living. It suggests there will be more pain and poverty for “just managing” (and “not managing”) families.
The analysis draws on what the public says every child requires for their basic needs to be met, and then conservatively costs each of these items to reveal the income needed to cope with the basic costs of raising a child. It is an incredibly detailed process. Focus groups tell us, for example, that every primary school child should really have two bath towels (£9 each from Tesco) and that every secondary school age child should have at least three pairs of non-uniform trousers (three pairs of £10 jeans, Tesco).
Using this process, the report calculates that at the moment a basic, no-frills childhood to the age of 18 costs £75,436 (£155,142 if we include housing and childcare costs) for a couple family.
An out of work family with two children, aged three and seven, receives benefits that cover only 58 per cent of the income needed to provide a minimum standard of living. So much for the safety net.
“A basic, no-frills childhood to the age of 18 costs £75,436, or £155,142 if we include housing and childcare costs”
The shortfall is also there when we look at working families. A family of four, with both parents working full time on the minimum wage has only 87 per cent—£59 a week short—of the income required to meet the basic needs the public says all children should have. In other words, families doing everything ministers ask of them, working every hour they can, even if it is on low pay, are finding they can’t afford the basics in life. Particularly troubling for a government which in the absence of a broad child poverty strategy simply proclaims that “work is the best route out of poverty.”
The news is grimmer still on where we’re heading. The next few years will see these families being dragged further away from a “just managing” budget as inflation combines with the benefit freeze and other benefit cuts being implemented. Our analysis shows that by 2019 the benefit freeze will amount to a £7.30 a week real-terms reduction in benefits for a first child in a family—equivalent to 9 per cent of the cost of a first child. For families where the first child was born on or after 6th April this year, the loss of the family element of child tax credit will be equivalent to 12 per cent of the cost of a first child.
Families with three or more children are particularly exposed. The cost of a third child to a couple family is an extra £90.60 a week, but the pernicious two-child limit on benefits, which breaks the link between assessed need and support, will deprive these families of £53.20 a week, or 59 per cent of the cost of that child.
“This autumn’s budget presents a significant opportunity to act on the government’s promise to fight the burning injustice of poverty”
The result will be fewer families able to afford “just managing” budgets and more children being tipped into poverty. The latest Institute for Fiscal Studies projections warn the number of children in poverty in the UK will rise from four million to over five million by the end of this parliament. A figure that will rise further if inflation exceeds Office for Budget Responsibility projections.
This is unsustainable. No government should be in the business of creating a public policy time-bomb that its successors will have to defuse. It’s unfair on families today and taxpayers in the future to ration our decency in this way.
This autumn’s Budget presents a significant opportunity for the government to act on its promise to fight the burning injustice of poverty. It would win widespread support if the Chancellor made the flagship Universal Credit a poverty-reducing policy once again—much to Iain Duncan Smith’s dismay, George Osborne’s 2015 Summer Budget made it poverty-producing.
Protecting support for children and restoring Universal Credit help for low earners would stop the living standards of low income families being decoupled from the rest of society. It is a matter of political choice.