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Minimum cost of living rising at twice the rate of inflation

30 June 2009

A report released today (1 July) finds that the minimum cost of living, set by members of the public, is rising at twice the rate of inflation, making it harder to live on a low income this year than last year. A minimum income standard for Britain in 2009 calculates the income needed to afford a minimum socially acceptable standard of living in Britain. Items that make up a large part of a minimum budget, such as food, have risen sharply in price. Some items that have got cheaper, such as paying a mortgage and running a car, are not part of a minimum budget.

A minimum income standard for Britain, published by the Joseph Rowntree Foundation, was first calculated in 2008. It is based on what members of the public thought people needed to achieve a socially acceptable standard of living. A year later, and in changing economic circumstances, the standard has been updated. This year’s report calculates that:

  • A single adult with no children now needs to earn at least £13,900 a year before tax to reach the minimum standard. This is a £500 rise from 2008; nearly half of this extra income is needed for the rising cost of food.
  • About one in four people are living below the minimum income standard for Britain, and this is increasing as unemployment rises.
  • The minimum cost of living has risen by 5%, contrasting with official inflation figures of 2½% (CPI) and -1% (RPI). A low-paid worker whose earnings were linked to the retail prices index could be 6% worse off this year, relative to the minimum cost of living.
  • Job loss can leave you with less than half the income that you actually need to live according to the minimum income standard for Britain.

The original focus groups believed that a car was not an essential item for everyone in Britain, and so it is not part of a minimum acceptable budget. However, while the cost of running a car has gone down this year, the cost of public transport has gone up.

Co-author Donald Hirsch, from the Centre for Research in Social Policy at Loughborough University, said: "In tough economic times, a growing number of people will ask themselves whether they have enough income to afford a minimum acceptable standard of living. Many fall out of work. More find it hard to make ends meet. People who have taken for granted a given standard of living suddenly have their expectations shattered. In such circumstances, a benchmark like the minimum income standard for Britain can help society to keep sight of what levels of income it finds unacceptable."

An online calculator is available for people to check whether their income meets the minimum standard for Britain at www.minimumincome.org.uk.