We still need more work to raise the poorest people's living standards

Political parties need a comprehensive plan to address the poorest people’s living standards, says Katie Schmuecker in this blog.

Political parties need a comprehensive plan to address the poorest people’s living standards, says Katie Schmuecker.

Yesterday’s news that inflation has fallen to 0.5 per cent, driven by falling oil prices and a supermarket price war, will undoubtedly ease some of the pressure on families struggling to make ends meet. It has also sparked debate about whether the squeeze on living standards has come to an end, and if it will still be an issue for the general election. In part the answer is likely to come down to how much ground has been lost, and how quickly it can be recovered.

Research by the IFS shows low-income households have experienced a higher rate of inflation over the last decade, compared with better-off households. This is because items like food and energy – which have seen steep price rises – constitute a larger proportion of their budgets.

Their incomes have also been eroded, partly as a result of stagnant wages, but partly too because of cuts to benefits and tax credits. The decision to uprate most working-age benefits by just 1 per cent has been a contributor to falling living standards among low-income households in recent years. But if inflation remains at 0.5 per cent, these families will actually find their incomes rising slightly faster than prices, making up a small amount of lost ground.

In order to monitor more effectively what is happening to living standards, Ed Miliband has recently called for the creation of a Living Standards index. While the UK Statistics Authority considers his request, he will be pleased to learn that JRF has a regular publication which sheds light on this crucial issue.

The Minimum Income Standard (MIS), compiled by Loughborough University and published annually by JRF, asks members of the public what is required for a minimum socially acceptable standard of living in the UK today. Every January we publish Households Below MIS, which monitors how many families are falling short of this standard, and by how much.

The latest edition will be published next week, but looking back over the six years JRF has been publishing MIS reveals the gulf that has opened up between family incomes and the cost of a socially acceptable living standard. Between 2008 and 2014 the cost of a basket of essentials has increased by 28 percent, while average wages have increased by 9 per cent, and there have been cuts to benefits and tax credits.

Given this backdrop it is perhaps unsurprising that the 2014 edition of Households Below MIS found the number of households falling short of the standard was increasing. Of the 20 million households monitored by MIS (it currently only applies to single people with or without children, couples with or without children and pensioners that live alone or as a couple) the number falling short increased by 900,000 over three years – from 3.8 million in 2008/09 to 4.7 million in 2011/12. This indicates the scale of the challenge.

Throughout the election campaign period, JRF will be looking carefully at the solutions the different political parties offer to this problem. Unless they are comprehensive – addressing the nature of work at the bottom end of the labour market, support for family incomes and the cost of essential goods and services – they are unlikely to succeed.