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28 Jun 2013

The living standards squeeze tightens as minimum cost of living soars by 25% since downturn

The minimum cost of living has soared by a quarter since the start of the economic downturn, according to a report for the Joseph Rowntree Foundation by Loughborough University, which details the true inflationary pressures facing low income households.

The research finds families are facing an “unprecedented erosion of household living standards” thanks to rapid inflation and flat-lining wages.

The findings are part of JRF’s annual Minimum Income Standard (MIS), which is based on the goods and services members of the public think people need in order to have a minimum acceptable standard of living.

Since the research was first published in 2008, the cost of the MIS basket has increased by 25 per cent, compared with 17 per cent for the Consumer Prices Index (CPI), the standard measure of inflation. The inflationary pressures facing low income households are far greater than official measures suggest.

Rising costs have implications for the earnings people now need to get by. In 2008, a single person earning £13,000 would have reached the minimum. If their wage had risen in line with average wage increases, they would now earn £14,000 - well short of the £17,000 salary needed to cover higher living costs in 2013, according to today’s report.

In 2013, to reach an adequate standard of living:

  • A single person needs to earn £16,850.
  • A working couple with two children need to earn £19,400 each.
  • A lone parent requires earnings of £25,600.

The cost of essentials has driven up the earnings required by families. Over the past five years:

  • Childcare costs have risen over twice as fast as inflation at 37%;
  • Rent in social housing has gone up by 26%;
  • Food costs have increased by 24%;
  • Energy costs are 39% more and;
  • Public transport is up by 30%.

Cuts to benefits and tax credits have exacerbated the problem over the past 12 months. The Coalition’s flagship policy of raising the personal tax allowance to £9,440 in April has helped - but is cancelled out by the cuts and the rising cost of essentials.

The freeze in child benefit, the decision to uprate tax credits by just 1% and the increase in the cost of essentials faster than inflation mean that a working couple with two children will be £230 worse off a year; a working lone parent has £223 less disposable income and a single person is worse off by £49 per year.

Katie Schmuecker, Policy and Research Manager at JRF, said: “Our research shows that the spiralling cost of essentials is hurting low income families and damaging living standards. The public have told us their everyday costs have soared above wage levels, driving up the amount they need to make ends meet.

“Inflation has impacts for us all, but is most keenly felt by the poorest. Balancing weekly budgets has become an unenviable task for those who are worse off. Help for families in paying for essentials at more affordable prices can be just as important as improving household income - a precarious combination of rising costs and falling incomes leaves families in a risky position.

“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.”

Author of the report, Donald Hirsch, Director for Research in Social Policy at Loughborough University, said: “From this April, for the first time since the 1930s, benefits are being cut in real terms by not being linked to inflation. This combined with falling real wages means that the next election is likely to be the first since 1931 when living standards are lower than at the last one.

“This year’s MIS tells us working parents with children need to earn £19,400 each at a time when wages are flat. There is a growing gulf between public expectations of the living standard everyone should be able to afford and their ability to earn enough to achieve it. About a quarter of households in the UK fall short of the income required to reach an adequate standard of living - for them a 25% increase in costs intensifies the everyday struggle to make ends meet.

“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.”

−ENDS−

Notes for editors

Article reference number: PR 13/127

  1. The full report and findings: A Minimum Income Standard for the UK in 2013 by Donald Hirsch from the Centre for Research in Social Policy, Loughborough University, is available to journalists by contacting the JRF press office.
  2. The Minimum Income Standard (MIS) is the income that people need in order to reach a minimum socially acceptable standard of living in the UK, based on what members of the public think. It is calculated by specifying baskets of goods and services required by different types of household in order to meet these needs and to participate in society.
  3. On this basis the weekly minimum budget:

    -  For a single working age person is £200.64
    -  For a pensioner couple is £241.25
    -  For a lone parent with one child is £284.57
    -  For a couple with two children is £471.16
  4. MIS is NOT a measure of poverty, nor represents the poverty line. MIS is about more than survival alone. It covers needs, not wants; necessities, not luxuries: items that the public think people need in order to be part of society.
  5. Hourly wages needed for a minimum income standard: £8.58 for a single person, £9.84 for a working couple with two children and £13.05 for a lone parent with one child.
  6. The annual earnings requirements given above are what families would need to earn gross, in order to have net incomes sufficient to meet these budgets. The net income is calculated by deducting from gross earnings the amounts paid in income tax, national insurance contributions, rent and childcare costs, and adding on any benefits and tax credits.
  7. An interactive visual lets you explore what goods MIS can buy you, as decided by members of the public. A minimum income calculator is also available, which lets people find out how their income measures up to the MIS. Both are available at www.jrf.org.uk/mis

    -    JRF is an anti-poverty think tank, funding a UK-wide research and development programme. JRHT is a registered housing association and provider of care services, with over 2,500 homes in York and north-east England. The two have a commitment to reduce poverty substantially.
    -    JRF and JRHT work together to help achieve social justice for people and places in poverty by:
    -    searching out the underlying causes of poverty and disadvantage, and identify solutions – through research and learning from experience.
    -    demonstrating solutions – developing and running services, managing land and buildings, and supporting innovation.
    -    influencing positive and lasting change – publishing and promoting evidence, and bringing people together to share ideas.
    -    JRF is on Twitter. Keep up to date with news and comments at www.twitter.com/jrf_uk

    The Joseph Rowntree Foundation and the Joseph Rowntree Housing Trust are completely separate from the other two Trusts set up by Joseph Rowntree in 1904; the Joseph Rowntree Charitable Trust (JRCT) and the Joseph Rowntree Reform Trust Ltd (JRRT). Further information about each organisation can be found at www.josephrowntree.org.
  8. Loughborough is one of the country’s leading universities, with an international reputation for research that matters, excellence in teaching, strong links with industry, and unrivalled achievement in sport and its underpinning academic disciplines.

    It was awarded the coveted Sunday Times University of the Year 2008-09 title, and is consistently ranked in the top twenty of UK universities in national newspaper league tables. It has been voted England's Best Student Experience for six years running in the Times Higher Education league, and in recognition of its contribution to the sector, the University has been awarded six Queen's Anniversary Prizes.

    It is a member of the 1994 Group of 11 leading research-intensive universities. The Group was established in 1994 to promote excellence in university research and teaching. Each member undertakes diverse and high-quality research, while ensuring excellent levels of teaching and student experience.

    The Centre for Research in Social Policy (CRSP) is an independent research centre based in the Department of Social Sciences. Over the past 30 years it has built a national and international reputation for high quality applied policy research.

Contact for all media enquiries

For all media enquiries contact:

Alison Barlow
Senior PR Officer
Loughborough University
T: 01509 228696
E: A.J.Barlow@lboro.ac.uk

Additional contact information

Danny Wright
JRF Media Relations:
01904 615950/07929 363024
daniel.wright@jrf.org.uk

and

Charlotte Morris
JRF Media Relations:
01904 615950/07800 615105
charlotte.morris@jrf.org.uk

or

pressoffice@jrf.org.uk