Full-time workers unable to reach ‘no-frills’ living standard after April’s real-terms benefit cut

• Cost of a child reaches almost £160,000 for couples, £200,000 for lone parents
• 2021-2022 saw biggest annual deterioration in living standards since 2012
• Autumn Statement must uprate benefits with inflation

As the Government comes under growing pressure to honour the pledge to uprate benefits with inflation from next April, new research for Child Poverty Action Group (CPAG) shows even couple-families with both parents working full-time for the ‘national living wage’ (NLW) can’t reach a minimum, socially acceptable living standard – as defined by the public - this year, largely because benefits were uprated far below inflation last April.* 

The Cost of a Child 2022, produced for CPAG by Loughborough University, finds that whereas last year these families could cover their minimum costs – helped by the temporary £20 universal credit uplift - this year, below-inflation uprating of benefits has left them 6% (£34 per week) short of a minimum, no-frills living standard. This is the biggest annual deterioration in living standards since The Cost of a Child reports began in 2012 and follows on from a gradual degradation since 2016, the research shows. 

In light of the report’s findings, CPAG calls on Government to commit to increasing benefits with inflation from next April. 

Lone parents:

For working lone parents the income gap this year is greater still: even on a median income, lone parents working full time are 12% (£58 a week) short of what they need. On the ‘national living wage’ (working full time), lone parents are 23% (£107 a week) short of what they need.

Non-working families:

For out-of-work families with two children, benefits will cover less than half their costs this year – (48% for a couple, 49% for a lone parent) compared to more than 60% in 2012. 

The Cost of a child:

The cost of raising a child to age 18 has reached £157,562 for couples and £208,735 for lone parents.

Since 2016:

While below-inflation uprating last April accounts for a substantial drop in benefit adequacy, the deterioration has also happened over a long period, the research shows. In-work families have lost least as they benefit from the rise in the ‘national living wage’ and from universal credit changes enabling them to keep more of their UC, but even they are generally worse off than in 2016 because of cuts to social security between 2016 and 2019 such as the benefit freeze and two-child limit. Couple-parents where one partner works part-time and the other full-time for the NLW have a £74 weekly shortfall today, compared to £51 in 2016. 

• Lone parents working full-time for the NLW are £108 short today, compared to £76 in 2016. 
• The gap for couples where both partners work full-time is similar this year (£34) as in 2016 (£36) but
• Out-of-work-couples with two children and paying private rent are a full £353 short of what they need each week, compared to £226 in 2016.

The Benefit cap:

Because the cap has been frozen since 2016, more and more households fall within its scope as standard benefit rates rise with inflation, but not for capped families, despite increases in their costs.

Among non-working households, couples who are private tenants and have at least two children, lone parent-private-tenants with three children, and couples with three children in social housing will all now generally be capped. As a result, their income shortfall is typically around 50% higher than in 2016.

Childcare:

Childcare is a key driver of costs for in-work families, the report finds – making up around 60 per cent of the lifetime cost of a child for a couple working full-time, compared to around 40 per cent in 2012.

Families on UC or tax credits are eligible for support with childcare costs up to a limit of £175 a week for one child or £300 for two or more. But these limits have been frozen since 2005 while actual childcare fees have risen sharply, leaving many families to try to make up the difference or decide that they can’t afford to work. In 2005, the average cost of a full-time place at a nursery in England for a child under 2 was approximately £140 a week. By 2022, the cost had doubled, to £274 a week, almost £100 above the limit eligible for support. Even using a childminder in the cheapest region for this service, the East Midlands, families pay £201 on average for a full-time place, still £26 above the level eligible for support.

Chief Executive of Child Poverty Action Group Alison Garnham said:

The warning lights are flashing as family incomes plummet following the real-terms benefit cut last April. Another cut would be calamitous. The Government must end the desperate worry and uncertainty in struggling households by uprating benefits with inflation and removing the benefit cap. Anything less and the UK will set itself a new child poverty record with millions falling too far back to ever recover.

Dr. Juliet Stone (Loughborough University), who co-authored the report said:

Our analysis has revealed the stark situation facing households with children in the face of the cost of living crisis. In the past year, families have experienced the sharpest deterioration in living standards that we have seen since we first started calculating the cost of a child a decade ago. Even for couple-parents who are both in work on the National Living Wage, rising costs coupled with real-terms cuts to state support, including for childcare, mean that their income does not allow them to reach a socially acceptable standard of living. The actions of the Government going forward will play a big part in deciding whether this situation can be remedied, or will continue to worsen in the face of ongoing rises in the cost of living. 

Notes to editors:

Today’s Cost of a Child 2022 report is here.

*Benefits are usually uprated each April based on the previous September’s inflation rate. In April 2022 inflation had reached 9% but benefits rose by only 3.1% (the inflation rate for September 2021). 

CPAG says benefits must be uprated from next April by at least 10.1% (the inflation rate for September 2022). 

Working age benefits were frozen at their 2015 levels until inflation-uprating was restored in 2020. This caused an 8% real-terms cut in these benefits.

The benefit cap limits the amount of benefits that non-working or low-earning households can receive to £383 a week for households outside London, and £442 a week for those in London. Almost all (94 per cent) households affected by it are only capped because of the failure to uprate the cap with inflation.

Child Poverty Action Group’s The Cost of a Child 2022 is the eleventh report in a series. The annual report looks at how much it costs families to provide a minimum socially acceptable standard of living for their children. Since 2012, this report series has systematically monitored the minimum cost of a child. Today’s report updates those calculations for 2022 and outlines the factors affecting the latest figures.

The cost of a child calculation uses the Minimum Income Standard (MIS) for the UK which is based on what members of the public think are the essential items that every family should be able to afford.

The cost of an individual child is calculated not by producing a list of items that a child needs, but as the difference that the presence of that child makes to the whole family’s budget. These calculations are made for different children according to their birth order, in each year of their childhood, and are added up to produce a total cost from birth to age 18. Where the figures show the cost of a child to a lone parent is higher than that for couples, this is because certain fixed costs of having children are offset by greater adult savings for the couple. For example, the costs of having a car are offset by greater savings on public transport fares when there are two adults not one.

For further information, see https://www.lboro.ac.uk/research/crsp/mis/.

CPAG media contact: Jane Ahrends 07816 909302.