Couple with two children 'must earn £40,600 to meet basic needs'

http://www.theguardian.com/money/2014/jun/30/couple-two-children-earn-basic-needs

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A couple with two children needs to earn £40,600 to have an acceptable standard of living, almost 50% more than before the recession, according to a report that highlights the squeeze on families from soaring energy bills and benefit cuts.

The Joseph Rowntree Foundation (JRF) said its latest research into what the public considered essential to reach a minimum acceptable standard of living showed a growing gulf between what people needed to earn and their actual incomes.

While the amount needed to cover a family's basic needs had risen 46% since 2008, average earnings had risen only 9% in that time, the charity said. On top of that many families had lost out because of changes to tax credits and benefits.

JRF warns that even if real wages start to rise again this year, low-earning families with children are unlikely to be able to close the gap between their income and their needs, because of low pay, rising prices and reduced government support.

"People have talked a lot about wages falling behind the cost of living but this really lays bare the challenge to make up lost ground. This isn't just falling short, it's falling behind," said Katie Schmuecker, a programme manager at JRF.

"We can't simply rely on wages improving as the economy recovers to solve the problem."

The research, carried out by Loughborough University, found that the cost of a minimum basket of goods was up 28% since 2008, higher than the official inflation rate of 19%. Three big culprits were singled out: food was up by 26%, domestic energy by 45% and bus travel by 37%.

Abigail Davis, one of the report's authors, said a growing number of people were falling below the minimum income standard and were unable to afford basic goods.

"Throughout the past few difficult years, the people we talk to have held a consistent view of what it means to live at an acceptable level in the UK.

"It means being able to afford to feed your family and heat your home properly, but also having enough to buy a birthday present for your children, and to spend time with your family away from home, such as the occasional meal out."

JRF, which introduced the concept of a minimum income standard in 2008, says people with children have been squeezed most since the onset of the recession. A lone parent with one child now needs to earn £27,000 – more than double the £12,000 needed in 2008.

For a couple with two children, each needs to earn £20,300 compared with £13,900 in 2008.

Explaining the impact of government changes in that time, the report says for every £1 low-income working families have gained from the raised tax allowance they have lost up to £4 as a result of cuts to tax credits and child benefit.

Conversely, increases in the personal tax allowance mean that for single people without children, the earnings required to meet a minimum standard of living are down slightly from a year earlier. But at £16,300, the minimum earnings are still up 21% from £13,500 in 2008.

The £20,300 that each person in a couple with children needs to earn before tax to afford a minimum acceptable standard of living is below the average UK gross salary. But for lone parents, the income deemed necessary by the JRF report, at £27,073, is more than average earnings. Median pre-tax annual pay was £26,884 in the UK April 2013, according to official figures for full-time employees.

The report will add to concerns that despite the UK economy finally regaining its pre-crisis strength, many households still feel worse off than before the downturn. Labour has sought to make the "cost-of-living crisis" a key battleground before the election, while the Conservatives have insisted their "economic plan is working" and have seized on signs that wages are finally starting to outstrip inflation after years of falling in real terms.

JRF, which works to reduce poverty and inequality, says action is needed in three areas to help ease the burden on households: on the cost of essentials, wages of the lowest earners and the way the state offers support.

The report comes as the food company Nestlé announces its commitment to paying the living wage – which is judged to be the minimum needed to secure a basic standard of living and is currently set at £8.80 an hour in London and £7.65 elsewhere.

Nestle, which already pays at least the living wage to its 8,000 employees, will now extend that guarantee to contract staff and agency workers. Around 800 contractors working with Nestlé will implement the living wage by December 2017.

"We are proud to be the first mainstream manufacturer in the UK to become a living wage employer and see this as an opportunity to be a positive influence in our sector," said the Nestlé UK & Ireland chief executive, Fiona Kendrick.

"As a major UK employer, we know that this is the right thing to do. Not only does it benefit our employees but also the communities they live and work in."

The move follows the recommendation last week that the government adopt the living wage as an "explicit goal" to help lift 1 million workers out of low-paid jobs.

But the living wage commission, made up of business leaders and anti-poverty groups, stopped short of supporting demands for legislation to create a higher minimum wage and said employers should be allowed to make their own judgments about paying a living wage to staff.