Benefit freezes and ‘poverty premiums’ leave struggling families out in the cold by End Child Poverty
Rises in the cost of living will outstrip meagre increases in child benefit by 17 times by 2020, a new report from the End Child Poverty coalition has revealed. The coalition’s “Feeling the Pinch” report shows that reductions in the value of benefits, relative to costs of living, are likely to leave a family with two children living in poverty, worse off by as much as £2800 per year by 2020, compared to the start of the decade.
In addition, analysis shows that a family in a typical privately rented two-bedroom property could also have a rent shortfall of around £154 a month by 2020, after a four-year freeze on housing benefit.
At the same time, families in poverty often have to pay more for essentials, despite being least able to afford them (known as the ‘poverty premium’). Essential household items like a cooker, energy and home insurance are likely to cost a family living in poverty nearly £1700 more than a higher income family would have to pay.
The coalition is warning that the disconnect between increases in financial support and those in the costs of living, together with the poverty premium, is leaving many families struggling to buy food for their children, or heat their home in winter.
End Child Poverty is calling on the Government to take action by ending the current four-year freeze on children’s benefits, by increasing help with housing costs in line with local rents and also by establishing a commission to explore how businesses can ensure that customers on a low income don’t end up paying the highest prices for goods and services.
Sam Royston, chair of the End Child Poverty coalition, said: “Families living in poverty are trapped between frozen support, rising costs of living, and a hefty poverty premium which means that they pay the most for basic essentials. End Child Poverty members know all too well the impact this poverty trap has on children’s lives. “
The full report ‘Feeling the Pinch’ from End Child Poverty is available online here
The coalition’s analysis shows that in April 2010, benefit income for an out-of-work single parent with two children (excluding housing costs) was around £198 per week. In order to keep up with the rise in the cost of living by 2020, this would have to increase to around £267 per week. The family’s actual 2020 income is expected to be around £214 per week. The real loss of £53 per week will leave this family worse off by nearly £2,800 a year.
Where private tenants’ rents have risen between 2010 and 2015 in line with average rental price inflation (a total of 11.7 per cent over the five-year period), a family renting a typical two-bedroom property in 2015 faced a shortfall of £82 per month on their Housing Benefit entitlement, compared with their actual rent.
In 2015, the new government decided to freeze local housing allowance rates for four years – from 2016 through to 2020. If actual rents rise by another 11.7 per cent during the second half of the decade, families in a typical two-bedroom property could see the shortfall increase by £72 per month – a total shortfall of around £154 per month.
The poverty premium calculation updates an illustration previously published by Save the Children. It finds that a typical low-income family could face an annual poverty premium of around £1,700 for everyday goods and services. The items included in the calculation are shown in the table below. There may also be other areas of spending that are subject to a premium, such as food costs, transport costs and cash withdrawals. These are not included in the poverty premium
calculation, but are explored further in the full report.
As you may recall in November 2016 End Child Poverty published a Child Poverty map of the UK which clearly showed that parts of Greater Manchester were some of the worst affected by child poverty.
Manchester Central was 2nd in the table of constituencies with the highest percentages of
children in poverty in 2015 and Manchester Gorton, and Blackley & Broughton were also in the top 20.