Minimum acceptable living standard impossible for many

• Minimum acceptable living standard impossible for many families - the public says 
• Cost of a child jumps to £166,000
• Benefits lagging well behind cost-of-living increases

High inflation pushed the cost of raising a child to £166,000 for a couple and £220,000 for a lone parent in 2023 but the enduring impact of benefit cuts and ongoing price rises have left many parents unable to give their children what the public says is a minimum acceptable living standard, new research shows. 

The Cost of a Child 2023

The Cost of a Child 2023, produced for Child Poverty Action Group by Loughborough University’s Centre for Research in Social Policy, looks at the cost of raising a child from birth to 18 and at what families need for a minimum socially acceptable living standard as defined by the public.

It finds that the combined effects of the pandemic, the cost-of-living crisis and social security cuts since 2016 have left even couple-families with two children and both parents working full time at the ‘national living wage’ £51 short of a decent living standard each week, compared to a shortfall of £37 last year.1  In 2021 and 2020 these families did briefly have the income needed for a decent living standard because they received the temporary pandemic-related and cost-of-living support payments, particularly the £20 universal credit uplift, but this respite was short-lived.

Family budgets were hit hard by a four-year freeze on benefits from 2016 and even as recently as 2022 benefits were uprated below very high levels of inflation. This year benefits rose as usual with inflation - by 10% - but this won’t do enough to counteract sustained inflation and the drop in benefit adequacy, particularly since 2016.

Couple-parents with two children and one full-time and one part-time worker are £89 per week short of a decent living standard this year (£81 in 2022).

Lone parents

For lone parents the gaps are starker still: those working full time are £125 per week short of an acceptable living standard (£117 in 2022). For lone parents working part time the gap has grown to £161 (from £153 in 2022).

Median earnings

Even lone parents working full time on the median wage, will be £67 a week short of a decent living standard this year; couple-parents earning the median wage do have an income that exceeds the threshold for an acceptable living standard, albeit only by £65 per week.

Non-working families

The income gaps for non-working families are cavernous and have grown fast, especially since 2016. Among non-working families both couple-parents and lone parents with two children have less than half the income they need for a decent living standard today (48% and 49% respectively- a shortfall of £332 and £265  per week). That shortfall has grown from £197 per week in 2021 and £297 in 2022 for couples and £144 and £237 for lone parents.      

Benefit cap

The incomes of non-working families are also hit by the benefit cap, which restricts the total amount of benefits a household can receive. The cap was raised for the first time this year to £423 per week for  families outside London, but even with the increase a couple with two children would hit the cap if they were paying private sector rent of just £116 per week. In practice this means most non-working families renting privately cannot get their full rents covered by social security and must plug often significant shortfalls by making household cuts in other areas.

Since 2016 prices have risen by much more than the benefit cap (which was only marginally increased in 2016) leaving non-working families with far less than they need. Non-working couple-parents renting privately with two children are £366 per week short of the income needed to reach an adequate living standard this year. That’s up from a £230 shortfall in 2016. Even in social housing, a couple family’s weekly income shortfall  is £332 today, up from £222 in 2016.

Childcare

Parents on universal credit can claim 85% of their childcare costs up to a maximum cash value.  This year the cash value that can be claimed increased to £219 per week for one child and and £375 per week for two children.  This is an improvement for low-income families who often find that childcare costs cancel the financial gains from working or working more, but in many areas of the UK, the new amount will fall far short of even 85% of the cost of a full-time nursery place for a child under two. In Inner London, parents would need to cover an additional £176 per week over and above the support provided by universal credit. Child Poverty Action Group is urging Government to increase childcare support to 100% of costs to improve parents’ chances of making work pay.

The Autumn Statement increased benefits with CPI from April as usual but the cumulative and lasting impact of the four-year benefit freeze means that benefit levels are still lagging well behind increases in living costs. And while the Statement ended the freeze on local housing allowances, it will resume in 2025. 

Chief Executive of Child Poverty Action Group, Alison Garnham said:

Families are being chased by a rolling storm of benefit cuts, the pandemic and the cost-of-living crisis. Their budgets can’t cope.  Four million children are already in poverty - more will join them unless politicians act.  All parties must commit to restoring the value of child benefit and to scrapping the two-child limit and benefit cap.  That would at least begin to close the gaping income gaps that are making it impossible for parents to provide a decent living standard for their children.  

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

Our latest analysis highlights the challenges facing many families in reaching a dignified standard of living in 2023. Years of cuts in support have left current benefit levels woefully inadequate, and earnings have not kept pace with rapid increases in costs. Increases in the National Living Wage and local housing allowance this year are welcome, but these will not undo the damage done over the past decade. We need long-term solutions to ensure that all households in the UK can live with dignity.

This is the twelfth report in a series. Since 2012, this report series has systematically monitored the minimum cost of a child. Today’s report updates those calculations for 2023 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. The cost of raising a child is higher for lone parents because they do not benefit from economies of scale to the same extent as couple-parents, therefore the additional cost of a child is higher for these families.  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 Loughborough University's The Minimum Income Standard for the United Kingdom

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