By Jaimie Kaffash
6 July 2010
The gap between the minimum cost of living and the income of the lowest earning families is increasing, a think-tank has today revealed.
In his Budget statement, Chancellor George Osborne announced that benefit increases would be linked to the consumer price index. However, research carried out for the Joseph Rowntree Foundation shows that the cost of food, transport and other essentials has been rising higher than the CPI and the minimum wage.
The Loughborough University study, A minimum income standard for the UK in 2010, show that a couple with two children would need £26,900 to achieve a minimum standard of living – an increase of £2,300 in the past two years. Although the £1,000 increase in tax allowances and council tax freeze announced in the Budget will help, these will be offset by cuts in Tax Credits, the freezing of Child Benefit, the rise in VAT and the cap on Housing Benefit.
Donald Hirsch, head of income studies at Loughborough University’s Centre for Research in Social Policy and one of the report’s authors, said: ‘The raising of the amount people can earn before paying tax is one way of helping people on low earnings to reach the minimum income standard. However, this will not on its own ensure that more people have enough, if at the same time tax credits and benefits are cut and incomes do not keep up with the real price rises that people face.
‘We must also remember that most people on benefits currently have far less income than they need for a minimum acceptable standard of living.’
Chris Goulden, programme manager at the JRF, told Public Finance: ‘The move to link benefits to the CPI does save money on the welfare bill. But the price will be paid in the long term by people who are relying on benefits for their income.
‘If you do become unemployed, you will be struggling,’ he added.
