Low-income families 'thousands of pounds short of basic standard of living'

Low-income UK family earnings continue to lag thousands of pounds a year behind the amount needed to meet the cost of what the public defines as a decent, no-frills standard of living, despite signs of an upturn in the economy.

The annual Joseph Rowntree Foundation-commissioned minimum income standard analyses the cost of a basket of basic necessities including three healthy meals a day, shoes, shelter, warmth, TV, a bed and basic furniture, internet access and enough to buy a present for a family member.

It found that a couple with two children, each working full time and earning the minimum wage in 2014-15 were left £74 a week short of being able to meet the cost of living essentials, while a similar family on safety net benefits faced an even larger gap of £196 a week.

To achieve a basic standard of living and pay rent last year, single people needed an income of £17,100 before tax, lone parents with one child £26,700, and couples with two children a gross household income of £40,000, the research estimates

The gap between incomes and the cost of a decent standard of living remained stable in 2014-15 after six successive years in which it widened. This was partly as a result of slightly above inflation rises to benefits and the minimum wage, together with lower prices.

However, the gap will widen again next year as inflation rises, and would be exacerbated if cuts to tax credits are introduced as a result of next week’s budget, researchers said.

Although the minimum income standard is not a poverty measure it shows how far working-age benefits and wages lag behind basic living standards. A single jobless adult’s benefit income, for example, meets just 40% of the cost of the itemised lists of basic goods and services needed for a decent life.

These baskets, which are agreed by a cross-section of the public, include staples such as food and fuel while allowing variation for different household needs. Families with children, for example, are allocated motoring costs, unlike single adult households. All are allocated cash for socialising and leisure. Spending on tobacco, pets, subscription TV, and foreign holidays, however, is excluded as non-essential.

Julia Unwin, the chief executive of Joseph Rowntree Foundation, said: “After seven years of declining living standards, the pause in rising costs is a very welcome respite. But many low income households are still much worse off than in 2008, leaving them struggling to make ends meet and reliant on benefits to top up their incomes.

“A couple with two children who each earn the minimum wage faces a shortfall of almost £4,000 a year between their incomes and what the public say they need for a minimum standard of living.

“We need to see action to raise wages, build more genuinely affordable homes and tackle the UK’s low productivity to help people get on at work.”

Donald Hirsch, director of the centre for research in social policy, Loughborough University and author of the report, said: “Even though earnings are forecast to grow healthily in the next few years, rising prices will prevent low earners from becoming better off if their tax credits are frozen – and more so if threats to cut them are implemented in the forthcoming budget.”

A government spokesman claimed that the report showed that people on low incomes have become better off relative to their needs.

He added: “We will continue to ensure that every part of Britain benefits from a growing economy and that everyone who works hard gets the opportunities they need to succeed.

“And as part of our long-term economic plan, our reforms to the tax system are allowing people to keep more of what they earn.”

TUC General Secretary Frances O’Grady said: “This report reveals the living standards crisis is far from over. Wages have fallen in real terms, with vital benefits reduced and public services scaled back. Too many of those in work cannot afford an acceptable standard of living.

“This research shows why Britain needs a pay rise not tax credit cuts. Unless we see stronger real wage increases and more decent jobs, the recovery will remain out of reach for many working families.”