Headline-grabbing, tax-cutting policies will bypass those in greatest need without wider changes, says Katie Schmuecker.
The 2015 General Election has been dubbed 'the living standards election', but the terms of the debate about who has fared better or worse – and indeed what sort of living standard they enjoy – is not always clear in political discourse. New research published today by the Joseph Rowntree Foundation throws new light on these questions and provides a benchmark against which policy changes can be assessed.
The Minimum Income Standard (MIS) research asks members of the public what goods and services all households should be able to afford to achieve a minimum, socially-acceptable standard of living. It provides a barometer of living standards that is rooted in public consensus – and the barometer is far from ‘set-fair’.
MIS is now in its sixth year, enabling us to look at what has influenced living standards between the recession and now. It shows relatively little change in terms of the goods and services people think are required for an acceptable standard of living, but the cost of the basket of essentials has soared by 28% during this time. Over the same time, average wages have increased by 9% and the National Minimum Wage by 14%.
To put it in context, imagine a couple with two children – let’s call them Michael and Susan. In 2008 both Michael and Susan were working and earning £14,000 each, giving them enough disposable income to afford an adequate standard of living at that time. To maintain that standard of living in 2014, they would each need to earn more than £20,000. But if they had received pay rises in line with the national average over the last six years they would actually be earning just £15,000 each today.
The cause of the decline in family living standards is not simply the rising cost of essentials and stagnant wages: austerity has also played a part. While Michael and Susan both benefit from the increase in the personal tax allowance, their support in the form of tax credits and Child Benefit has reduced. They lose £2 for each £1 gained as a result of tax and benefit changes. Together these forces mean a gulf has opened up between family incomes and needs.
Some may look at the economic indicators – the forecast for wage growth and low inflation – and think we’re reaching the other side of the storm. But it looks highly unlikely that returning wage growth alone will be enough to bridge the gap for families at the bottom. The three main parties have floated headline-grabbing, tax-cutting policies, but these will bypass those in greatest need without adjustments.
Rather, the parties need a coherent strategy for improving family living standards. This must include tackling pay and the quality of work at the bottom end of the labour market; taking steps to address the cost of essentials; and ensuring the tax and benefit system enables low-income families to keep as much of their earnings as possible and tops up their income where necessary.
As the recovery gathers momentum, those in greatest need must feel the benefits of growth. Only through coordinated action will the living standards of those at the bottom begin to make up the ground they’ve lost. That will require some help from whoever forms the next government.