Business

Living costs 'rising for parents' as prices increase

Family
Image caption Families have seen prices rise for many essential items, the report says

Parents must each earn at least £18,400 in 2011 so their family can live to an acceptable standard, a charity says.

Cuts to childcare assistance and the freeze on child benefit, when prices have risen, have raised the income requirement, the Joseph Rowntree Foundation (JRF) said.

The minimum cost of living was 5% higher than in 2010, the report said.

But the government said it was doing what it could to help people who were feeling squeezed.

"The Government recognises that people are feeling squeezed and is doing what it can to help, reducing fuel duty so taxes on fuel are 6p lower than they would have been and implementing an increase in the personal allowance in April, taking over 800,000 of the lowest paid out of tax," an HM Treasury spokesman said.

The JRF report added that a single person needed to earn £15,000 before tax and benefits for an acceptable standard of living.

"This report shows that the squeeze in living standards caused by the combination of rising prices and stagnant incomes is hitting people on low incomes hard," said the author of the report, Donald Hirsch, of Loughborough University.

Inflation

Since 2008, the JRF has gathered information from focus groups to set a benchmark for what it considers to be an "acceptable standard of living".

The official cost of living rose by 4.5% in the year to April, as calculated by the Consumer Prices Index (CPI) measure of inflation.

However, the JRF said that the "minimum budget" had risen by between 4.7% and 5.7% during the same period.

This was because the basket of goods included food, council tax and public transport, taking up a considerable chunk of lower-income families' budgets, which had risen sharply in price.

"In practice, earnings have risen by less than inflation, meaning that many people on low incomes are finding it substantially harder to make ends meet than a year ago," the report said.

In addition, the housing costs had risen, and tax credits had been cut for some families so they needed to cover more of their childcare costs themselves.

"This report is an early sign of the huge impact that even seemingly modest changes in the welfare system can have, especially for low-income working families who depend on it to achieve an acceptable living standard," the report said.

The report said that for each pound by which they fell short of what they needed, they had to earn several pounds more to cover for higher taxes and lower tax credits.

In a statement, the government said that it had, "announced above-inflation increases to the child element of the Child Tax Credit of £180 in 2011-2 and £110 in 2012-13, funded in part by recycling the savings from freezing child benefit".

The gap between the national minimum wage and the minimum income standard was highlighted by the JRF, which has also produced a minimum income calculator.

It suggested that a wage of £7.67 an hour would be needed by a single person, and £9.41 an hour by each of a couple working full-time with two children.

A lone parent with one child would need to earn £9.33 an hour. The national minimum wage is £5.93.

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