The ever widening gap

The gap between low income family budgets and what they need for a decent standard of living is now much wider than before the start of the global recession which followed the 2008 banking collapse.

Those earning the National Minimum Wage and those on safety net benefits have seen the gap widen between what the public say people need and these families can afford.

The gap starts at a ÂŁ1,976 annual shortfall for a lone parent on the minimum wage with one child. It rises to a ÂŁ10,192 annual shortfall for couples on safety net benefits with two children.

And there are warnings that cutting on tax credits – threatened by the Tories in next week’s budget – will make matters worse.

New research funded by the Joseph Rowntree Foundation looked at what the public say people need to have an acceptable living standard in the UK in 2015. They found the gap between what people thought was needed and what could be afforded was greater than in 2008.

It is not a measure of poverty and includes the cost of a holiday and to be able to buy a present for a family member. It does not include cigarettes or the cost of satellite television.

For those on the minimum wage – ÂŁ6.70 an hour – the research found that, based on weekly pay and all figures at 2015 values:

• Single people were ÂŁ27 a week short in 2008, and ÂŁ52 a week short in 2015
• Couples with two children were ÂŁ31 a week short in 2008, and ÂŁ74 a week short in 2015
• Lone parents with one child were ÂŁ4 a week short in 2008, and ÂŁ38 a week short in 2015

Those who relied on safety net benefits face even bigger shortfalls:

• Single people were ÂŁ100 a week short in 2008, and ÂŁ109 a week short in 2015
• Couples with two children were ÂŁ148 a week short in 2008, and ÂŁ196 a week short in 2015
• Lone parents with one child were ÂŁ74 short in 2008, and ÂŁ117 short in 2015
• Pensioner couples were ÂŁ11 a week above what was needed in 2008, but ÂŁ10 a week short in 2015

The gap has not got any wider in the last year because of low inflation and even deflation, where prices actually fell. Since 2008, increases in average earnings have fallen short of the wage rises needed to maintain a decent standard of living.

Since 2008 average wages have risen by 12 per cent. Over the same period, the cost of the goods and services which people need to achieve a decent standard of living has risen by 29 per cent.

Julia Unwin, JRF Chief Executive, said, “After seven years of declining living standards, the pause in rising costs is a very welcome respite.

Much worse off

“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.”

Unite assistant general secretary Steve Turner was not surprised. Steve said, “Osborne boasts that we are seeing an economic miracle and basking in economic sunshine. This Tory government is totally out of touch with ordinary people and the devastating toll the recession and slowest recovery on record has had on peoples’ living standards.

“Next week Osborne is going to unleash the latest round in austerity, with the deepest cuts to our public services and benefits that we have yet seen. This will hurt living standards of the 99 per cent and leave the 1 per cent untouched.

“The last thing we need is what he is threatening – promises of tax joy for the rich and pain for everyone else. Instead, we need decent work for all with good pay people can live on, not earn their poverty.

“This combined with need investment for a large scale house building programme where we can massively increase the number of council homes available for social rent would grow the economy and improve living standards for all.”