BY THE NEXT General Election, 43 per cent of families (12.5 million households, 30.6 million people) across Britain will be unable to afford the cost of essentials, like putting food on the table or replacing clothes, according to new analysis by the New Economics Foundation (NEF).
This is an increase of 12 percentage points (3.6 million families, 8.9 million people) between the 2019 general election and December 2024.
The research uses the Minimum Income Standard (MIS), which is the UK’s leading approach to measuring living standards based on need and is used to calculate the‘real’ Living Wage paid by companies like Ikea and KPMG, and football clubs including West Ham, Liverpool and Chelsea.
The analysis shows the 12.5 million families unable to afford the cost of living by December 2024 includes 88 per cent of single parents and 50 per cent of working families with children. The average shortfall for families falling short of a decent standard of living standard will have risen from £6,200 a year as of December 2019 to £10,000 by December 2024.
NEF is calling for universal credit (UC) to be replaced by a new social security system, a national Living Income. A national Living Income would set an‘income floor’ benchmarked against the MIS, below which no one can fall whether they are in or out of work.
Under this proposal, over two thirds of the population would see their disposable incomes rise:
- For the poorest families, incomes would rise by more than 50 per cent (£500 a month) on average.
- For middle-income families, incomes would increase nine per cent (£200 a month).
- For single parents, 18 per cent (£270 a month).
- For out-of-work families with children, 36 per cent (£540 a month).
- For single people, eight per cent (£110 a month).
- For severely disabled people, 32 per cent (£740 a month).
A national Living Income requires a number of recommendations to be implemented in the next parliament, including:
- A guaranteed minimum income of at least 50 per cent of MIS after housing and childcare costs (AHCC). This compares to 35 per cent and 33 per cent of MIS (AHCC) for single adults and couples over the age of 25 (respectively) on UC.
- Alignment of tax and income protection around a new guarantee that no one pays tax or has benefits withdrawn until their income reaches 100 per cent of the MIS (AHCC) for a single adult, including reform to personal tax allowances and work allowances.
- A universal national allowance of £187 a month paid to almost everyone in the country as a new pillar of income protection for all, and making up part of the 50 per cent of MIS guarantee.
- Additional payments to ensure that disabled people and those unable to look for work in the near future receive up to100 per cent of the MIS (AHCC) in income support.
- Enabling auto-enrolment onto the NLI so that means-tested income protection is paid automatically when incomes fall in the same way that tax contributions rise when incomes go up, and eliminating the five-week wait.
- Scrapping existing caps, limits and sanctions, including the benefit cap and the two-child limit.
NEF estimates that implementing the full national Living Income reforms for the first parliament would cost £70.6 billion per year in 2021/22 prices, with an initial package of reform costing £25.3 billion. The research shows that the package could be funded through a combination of aligning headline rates and removing reliefs and allowances across capital gains; extending national insurance contributions to all types of income; introducing a flat rate of relief on pensions; equalising rates of dividend tax with income tax; and scrapping the much criticised entrepreneurs’ relief in capital gains tax.
Sam Tims, economist at the New Economics Foundation, said: “A decade of cuts, freezes, caps and haphazard migration between systems has left the UK with one of the weakest safety nets among developed countries. Millions of families were already living in avoidable deprivation and hardship but as we enter the greatest living standards crisis on modern records, the day-to-day experience of low-income families is set to become even more desperate.”
“We need a bold new way of providing income support that will help all people deal with the challenges presented by the fast-changing world we’re living in. A national Living Income would set an income floor that is enough to meet life’s essentials, which no one can fall below whether they are in or out of work.”
* Read The National Living Income: Guaranteeing a minimum income for all here.
* Source: New Economics Foundation