The worst five years for struggling families

28th Jun 2013

JRF's Minimum Income Standard for 2013 shows that a decade of progress in reducing family deprivation is being steadily unwound.

A decade of progress in reducing family deprivation is being steadily unwound, says Donald Hirsch.

In 2008, with our Minimum Income Standards research, the news for low-income families was grim, but not hopeless. We found that 'safety-net' benefits did not provide a basic living standard for parents who had lost their jobs, but required their families to live at a third below what the public thought you need for an acceptable life. But this was better than for those without children, who got less than half.

And while a minimum wage was also insufficient to bring families above this level, it was not too far below – about £1 extra an hour was needed. Since this was still a time when family benefits, in and out of work, were becoming generous, many low-income families were within touching distance of being able to make ends meet: to provide their children with the necessities of life without going into disastrous debt.

Almost everything that has happened since then has pushed such families in the opposite direction. New research, out today, shows that costs have been rising fast, especially for working families, who have seen childcare fees increase by over a third. The MIS basket of essential goods and services has become a quarter more expensive, a much steeper rise than ‘official’ Consumer Prices Index inflation, which has risen 17 per cent. Basic items like food are inflating much faster than average living costs, while wages have hardly risen at all. Children’s benefits are now falling in real terms. The Spending Review announcements, while exempting some out-of-work benefits from the overall cap on welfare spending, suggested that support for working families (notably tax credits, soon to become Universal Credit) would face a new squeeze. And the one policy claimed to help low earners, increased tax allowances, will actually end up giving least to low-earning working families supported by Universal Credit.

The upshot of all this is that the prospect of reaching an acceptable income, tantalisingly close for many families in 2008, has slipped steadily further out of reach. As the figures on child poverty are showing, a decade of progress in reducing family deprivation is being steadily unwound.

This trend differs from anything seen in my lifetime – including in the 1980s, when the poor were standing still as the rich progressed. Now, absolute living standards have declined over a sustained period, including for those who started out with least, for the first time since the 1930s. It’s the first time since that decade that basic safety-net benefits have been cut in real terms.

Ominously, 2015 will be the first General Election since 1931when living standards are likely to be lower than at the last one. I don’t like to overdo historic parallels, but 1931 produced the greatest swing in political history, against the outgoing (Labour) government, with the Conservatives gaining 210 seats and winning 55 per cent of the vote – the last time any party has won the confidence of a majority of the electorate…

As households balance weekly budgets and see an unprecedented erosion of their living standards, the party that offers the best remedy could see itself in power in 2015.

Read more about our work on Minimum Income Standards.