'Unprecedented squeeze' on families
Families are struggling with an "unprecedented" squeeze on their living standards amid high costs and flatlining wages, a report has warned.
The minimum cost of living has soared by one quarter since the economic downturn and the true inflationary pressures on many households are much worse than official measures suggest, a report for the Joseph Rowntree Foundation (JRF) argued.
The cost of the goods and services which people believe they need to ensure a minimum acceptable standard of living has rocketed by 25% since the foundation's research was first published in 2008. This is a much faster rate compared with a 17% increase in the standard measure of inflation recorded by the consumer prices index (CPI).
The research found that families are having to deal with an "unprecedented erosion of household living standards" as the gap widens between what they feel they need to live comfortably on and their actual income.
It said that in 2008, a single person earning £13,000 would have reached the minimum they needed to get by. If their wage had risen in line with average increases, they would now be earning £14,000 - which is around £3,000 short of the £16,850 salary needed to cover higher living costs in 2013, according to the report. A working couple with two children now need to earn £19,400 each just to maintain adequate living standards, the report found, while a single parent would need earnings of around £25,600.
One of the biggest financial pressures on families over the last five years has been the rise in childcare costs, which have soared over twice as fast as inflation at 37%, the report said. Energy costs have increased by 39% over the five-year period and public transport has become almost one third (30%) more expensive. Food costs have risen by 24% since 2008 according to the foundation's calculations, while rent in social housing has gone up by 26%.
The Government's flagship policy of raising the personal tax allowance has eased the strain - but the positive impact of this is being eclipsed by the effects of spending cuts and the rising costs of essentials, the report said. On Wednesday, a separate report published by the Office of the Children's Commissioner for England warned that Government spending cuts and tax and benefit changes will push more than half a million more children into poverty by 2015.
Katie Schmuecker, policy and research manager at JRF, said: "Cuts to benefits and tax credits - especially cuts to support for childcare - combined with stagnant wages and the rising cost of essentials is resulting in an unprecedented erosion of living standards. The Government has introduced measures like raising the personal tax allowance to try and help, but any positive effect is more than cancelled out. If the Government wants to help these struggling families, they have to make sure that different policies join up rather than contradict each other."
Donald Hirsch, author of the report, said there is a "growing gulf" between people's expectations of the living standards everyone should be able to afford and their ability to achieve it. He said: "This year's report demonstrates how the price of a basket of goods needed for an acceptable living standard has risen far faster than average inflation. This has combined with low pay increases to create a widening gap between income and needs."
Oxfam's Chris Johnes said: "The coalition Government's decision to arbitrarily limit increases in benefits to 1% - much lower than the rising cost of essentials - in January has made things worse for people in low-paid work or who are seeking work. There is clear evidence that families with children are being hit worst of all. The Government needs to make raising living standards of the millions of people on lower incomes a higher priority - tackling high costs as well as low incomes. Simply relying on economic growth to 'trickle down' is a tired and failed strategy which will do little or nothing for the millions whose incomes are below minimum acceptable levels."