AS THE UK GOVERNMENT comes under growing pressure to honour the pledge to uprate benefits in line with inflation from next April, new research for Child Poverty Action Group (CPAG) shows even couple-families with both parents working full-time for the ‘national living wage’ (NLW) cannot reach a minimum, socially acceptable living standard – as defined by the public – this year, largely because benefits were uprated far below inflation last April.
The Cost of a Child 2022, produced for CPAG by Loughborough University, finds that whereas last year these families could cover their minimum costs – helped by the temporary £20 universal credit uplift – this year, below-inflation uprating of benefits has left them six per cent (£34 per week) short of a minimum, no-frills living standard. This is the biggest annual deterioration in living standards since The Cost of a Child reports began in 2012 and follows on from a gradual degradation since 2016, the research shows.
In light of the report’s findings, CPAG calls on UK Government to commit to increasing benefits with inflation from next April.
For working lone parents the income gap this year is greater still: even on a median income, lone parents working full time are 12 per cent (£58 a week) short of what they need. On the ‘national living wage’ (working full time), lone parents are 23 per cent (£107 a week) short of what they need.
For out-of-work families with two children, benefits will cover less than half their costs this year – (48 per cent for a couple, 49 per cent for a lone parent) compared to more than 60 per cent in 2012.
The cost of raising a child to age 18 has reached £157,562 for couples and £208,735 for lone parents.
While below-inflation uprating last April accounts for a substantial drop in benefit adequacy, the deterioration has also happened over a long period, the research shows. In-work families have lost least as they benefit from the rise in the ‘national living wage’ and from universal credit changes enabling them to keep more of their UC, but even they are generally worse off than in 2016 because of cuts to social security between 2016 and 2019 such as the benefit freeze and two-child limit. Couple-parents where one partner works part-time and the other full-time for the NLW have a £74 weekly shortfall today, compared to £51 in 2016.
- Lone parents working full-time for the NLW are £108 short today, compared to £76 in 2016.
- The gap for couples where both partners work full-time is similar this year (£34) as in 2016 (£36)
- Out-of-work-couples with two children and paying private rent are a full £353 short of what they need each week, compared to £226 in 2016.
The Benefit cap:
Because the cap has been frozen since 2016, more and more households fall within its scope as standard benefit rates rise with inflation, but not for capped families, despite increases in their costs.
Among non-working households, couples who are private tenants and have at least two children, lone parent-private-tenants with three children, and couples with three children in social housing will all now generally be capped. As a result, their income shortfall is typically around 50 per cent higher than in 2016.
Childcare is a key driver of costs for in-work families, the report finds – making up around 60 per cent of the lifetime cost of a child for a couple working full-time, compared to around 40 per cent in 2012.
Families on UC or tax credits are eligible for support with childcare costs up to a limit of £175 a week for one child or £300 for two or more. But these limits have been frozen since 2005 while actual childcare fees have risen sharply, leaving many families to try to make up the difference or decide that they can’t afford to work. In 2005, the average cost of a full-time place at a nursery in England for a child under two was approximately £140 a week. By 2022, the cost had doubled, to £274 a week, almost £100 above the limit eligible for support. Even using a childminder in the cheapest region for this service, the East Midlands, families pay £201 on average for a full-time place, still £26 above the level eligible for support.
The Chief Executive of Child Poverty Action Group, Alison Garnham, said: “The warning lights are flashing as family incomes plummet following the real-terms benefit cut last April. Another cut would be calamitous. The Government must end the desperate worry and uncertainty in struggling households by uprating benefits with inflation and removing the benefit cap. Anything less and the UK will set itself a new child poverty record with millions falling too far back to ever recover.”
Dr. Juliet Stone (Loughborough University), who co-authored the report said: “Our analysis has revealed the stark situation facing households with children in the face of the cost of living crisis. In the past year, families have experienced the sharpest deterioration in living standards that we have seen since we first started calculating the cost of a child a decade ago. Even for couple-parents who are both in work on the National Living Wage, rising costs coupled with real-terms cuts to state support, including for childcare, mean that their income does not allow them to reach a socially acceptable standard of living. The actions of the Government going forward will play a big part in deciding whether this situation can be remedied, or will continue to worsen in the face of ongoing rises in the cost of living.”
* Read The Cost of a Child 2022 here.
* Source: Child Poverty Action Group