Families on Low Incomes Suffering Most

New research published by the Joseph Rowntree Foundation (JRF) has shown that families are struggling to make ends meet amid rising food and energy prices, Government cuts to tax credits and the freeze on child benefit.

The research is based on the JRF Minimum Income Standard (MIS). The MIS calculation, first developed by the JRF in 2008, is based on asking members of the public what items a household needs to have a minimally acceptable standard of living.

Families have been particularly hard hit by the current economic climate and the Government’s austerity measures. According to JRF, due to reductions in the amount a couple on a low income can claim for childcare, they now need to earn 20% more than in 2010 to meet the shortfall.

The research revealed that a single person would have to earn £15,000 a year before tax (£7.67 per hour, full time) in 2011 to meet the MIS, while a couple with a single earner and two dependent children would have to earn at least £31,600. The minimum wage is currently £5.93 an hour.

Previously, for families on low incomes, 80% of childcare costs were covered by tax credits. This has now fallen to 70%. Based on their calculations of childcare at £200 per week, a family who paid £40 a week before the reduction would now have to pay £60, an increase of 50%, or £1000 a year. To make up for this shortfall earnings would have to increase by around £3,000, taking Income Tax, National Insurance and the £1,500 reduction in tax credits (due to the higher earnings) into account. This means that those families that reached the Minimum Income Standard last year would have to earn an additional £3,000 just to break even.

Research from the energy comparison site U Switch estimates that around 6m people in the UK are now living in fuel poverty, a figure they say is misleading because the current measurement does not take into account rent and mortgage costs. When figures are revised to include these, the number is closer to 9m, or a quarter of all households.  As food inflation is now running at 5.7%, the squeeze on living standards, especially for those on low incomes, is a matter or growing concern.

Report: A Minimum Income Standard for the UK in 2011

Tags: Fuel Poverty, Poverty, Research, Welfare