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Parents working on the minimum wage are struggling to afford basic needs, with the cost of raising a child from birth to age 18 remaining high at £149,805.

A new report produced by Loughborough University’s Centre for Research in Social Policy (CRSP) for Child Poverty Action Group (CPAG) reveals that the UK is on the verge of a fresh crisis in family finances with many parents unable to afford what the public regards as a minimum standard of living.

The Cost of a Child 2015 report reveals that families with both parents working full time at the national minimum wage are16% short of the basic amount needed to provide themselves with a minimum standard of living. For a couple with two children, that’s a gap of £75.75 per week.

The report also finds that the minimum cost of raising a child up to 18 years of age remains high at £149,805 (a 1.6% increase on 2014 and a 5% increase since 2012).

It concludes that the high cost of a child is expected to rise less steeply in future years, but state support in covering these costs will deteriorate sharply as a result of government policies, creating a net loss for most low-income families.

The report’s other main findings are as follows:

• Out-of-work couple families face a 43% shortfall in the basic amount needed to provide themselves with a minimum standard of living. For lone parents, the shortfall is 13% for those in work and 39% for those not working 

• In the year to 2015, the cost of a child increased to £84.188 over 18 years for a couple – or £149,805 if rent, council tax and childcare are included. For lone parent families – where only one adult can make offsetting savings from their own living expenses – the costs of a child are higher:  £97,576 over 18 years or £167,339 including rent, childcare and council tax. 

Now in its fourth year, The Cost of a Child 2015 draws on what the public says every family requires to meet its basic needs and to participate in society. It examines the costs associated with raising children, and the extent to which parents struggle to meet them even when they are in work.   

The report lists several July 2015 Budget measures expected to make it much harder to meet children’s basic needs:

1. A four-year freeze on working age benefits, including child benefit.  This means that as children’s costs increase, help to cover them will not.  The OBR forecast of a 7% cumulative inflation rate from 2015 – 2019 will potentially cause the basic cost of a first child to rise by approximately £6 to £8 a week, leaving low-income families both in and out of work that much behind in meeting this cost. From 2017, new claimants will have their tax credit or universal credit cut by a further £10.45 per week per family, with the loss of the family element of child tax credit 
2. Cuts in the amount parents can earn before tax credits or Universal Credit start to be withdrawn.  For families on tax credits, this lower earnings level once combined with the new, higher rate at which credits are withdrawn as wages rise, means that top ups for the low paid will start being reduced earlier and also at a steeper rate, amounting to a major loss of £24 per week. Combined with the freeze and the removal of the family element (see previous paragraph), this means a cut of nearly £50 a week in the level of support for a working family with two children, relative to the cost of those children, by 2019 for new claims. For families claiming universal credit, the reduction in the amount they can earn before the credit starts to be withdrawn (at 65p from every extra pound), will mean a £12 weekly loss for lone parents and £5 for couples 
3. Lowering the benefit cap to £23,000 in London and £20,000 outside the capital will reduce the net income of families already hit by the cap by £58 per week in London and £115 outside it. For those affected, out-of-work benefits, which until recently covered about two-thirds of minimum needs, will typically be slashed to less than half the minimum needed 
4. Limiting tax credits to two children from 2017. For a couple with three children, the cut represents 16% of minimum family costs. 

The report states the new, extra support for childcare is potentially good news. Extra provision and help with 85% of the costs for Universal Credit claimants from 2016 could bring down costs substantially for families using paid childcare. But the report also warns that the new financial support will not be available to families on tax credits, and the delay in rolling out universal credit will put off any gains for families until 2016 at the earliest. Meanwhile, cash limits on support levels could leave many parents having to bear ongoing cost increases in childcare.

Donald Hirsch, Director of CRSP and author of the report, said: “With low inflation, the cost of raising children has stopped growing, but many families still lack the incomes they need to afford even the basics.

“Over the next five years, some of the most vulnerable families will see support for meeting these costs reduce, sometimes leaving them with less than half of their family's minimum needs if they are not working. The hardest hit will be larger families – the punishment for falling on hard times if you have more than two children will be something close to destitution. However, even with two children, many families with anything more than a very modest rent will hit the new Benefit Cap levels, and will have their benefits reduced to levels that make it ever tougher just to get by."

Alison Garnham, Chief Executive of CPAG, said: “Low inflation helped keep the cost of a child relatively flat last year, but the barrage of cuts announced in the Budget will batter modest and low-income family budgets, making it very much harder to afford even bottom-line, basic children’s costs.

“Shockingly, even couple-parents – who are both working full time on the current minimum wage – are already well short of what they need for no-frills basics.   

“One in four children lives in poverty in the UK and the oncoming social security cuts will push the number higher – at greater cost to the taxpayer. We should be backing parents’ efforts to build a future with prospects for their children, not consigning them to financial misery and narrow horizons. The Government should invest in a real living wage and give children’s benefits the ‘triple lock’ protection that pensions enjoy.”