New report warns nearly half of UK children will be living below an ‘acceptable standard’ by April
Nearly half of children are expected to be living in families forced to “make sacrifices on essentials” by the start of the new financial year, new analysis suggests.
The New Economics Foundation (NEF) has estimated that 23.4 million people will be short of funds to meet the “acceptable standard of living” by April 2022, by an average of £8,600 per year.
This represents more than a third (34%) of the population, the think tank said, and means nearly half (48%) of children will be part of households “unable to provide them a decent standard of living”.
The figure rises to 77% for children in single-parent households, and 96% for those in families out of work, according to the NEF’s estimates.
Labour said it was “shameful” that “so many children are now growing up in poverty and insecurity under the Tories”.
The NEF measured the cost of living using the minimum income standard (MIS), as calculated by Loughborough University’s Centre for Research in Social Policy.
The MIS produces budgets for different household types, based on what the public thinks is needed for an “acceptable standard of living” in the UK.
The NEF compared these budgets with people’s incomes, creating what it said was “an accurate picture of how many people will be unable to afford the cost of living” by April.
It said the implication of living with an income below the MIS is “having to choose between everyday essentials”.
“The average couple with children with an income below the MIS will miss the threshold by £184.61 per week,” the NEF said.
“Missing the MIS by such a large amount will force people to make impossible choices.”
Sam Tims, an economist at the NEF, said “there is little time left for the Chancellor to take action to avert the worst real-terms incomes squeeze in 50 years”.
“The cost of living is increasing faster than at any point in recent history. While all families are set to feel a squeeze come April, the lowest income households will be hit proportionately harder,” he said.
“But the cost of living is only a crisis when people cannot afford it and Government support must be able to flexibly respond to this.”
Meanwhile, the Resolution Foundation has published new research suggesting the prolonged conflict in Ukraine could see a second inflation spike this autumn, reaching more than 10% for the poorest households.
The Chancellor is heading towards his spring statement with “good news on the public finances but terrible news on the family finances”, the think tank said.
Borrowing for the current financial year is due to be £30 billion lower than forecast in October, it said, with tax revenues expected to come in £40 billion higher than forecast.
But it warned the prospect for family finances is “bleak”, while the Ukraine crisis means there is “heightened uncertainty around the UK’s economic outlook, with the only certainty being that it has deteriorated markedly”.
The think tank warned the conflict will cause higher inflation, which will lead to higher debt repayments for the Chancellor and a deeper income squeeze.
It is also likely to “weaken GDP growth, and increase the probability of a recession”, it said.
“A prolonged conflict in Ukraine would mean inflation being higher and longer lasting than previously forecast, with the drivers of inflation likely to shift over the course of the year,” the Resolution Foundation said.
“While inflation is currently fairly evenly spread across the income distribution, that could change in the autumn as food price inflation (already two percentage points above its historic average) continues to build, and rising wholesale energy costs drive another sharp increase in the energy bill price cap in October.
“With the poorest tenth of households spending twice the share of their family budgets on food and energy bills compared to the richest tenth of households, the second inflation spike of 2022 in the autumn could reach over 10% for these families.”
The Foundation suggested the Chancellor should “revisit the uprating of benefits this April”.
It said this would be a better idea than scrapping the planned national insurance rise – a move it claimed would be “poorly targeted”.
James Smith, research director at the Resolution Foundation, said: “The top priority should be to protect poorer households, who are most exposed to the biggest cost of living crisis Britain has faced in generations.
“This can be done by increasing benefits by 8%, rather than 3.1% as currently planned, in April. The Chancellor cannot protect Britain entirely from the difficult times that lie ahead, but he needs to act urgently to ensure the pain is fairly shared.”
In response to the NEF’s analysis, Jonathan Ashworth, Labour’s shadow work and pensions secretary, said: “It’s shameful so many children are now growing up in poverty and insecurity under the Tories, in households unable to afford basic essentials.
“Twelve years of Tory economic mismanagement have given us surging inflation, rocketing heating bills, punishing tax rises and two huge cuts to universal credit within six months.”
A Treasury spokesman said: “Russia’s devastating invasion of Ukraine will have a huge impact on lives and livelihoods around the world and the effects will be felt across this country.
“It is right that we do all we can to show solidarity with the people of Ukraine and work with our allies and partners to impose the most punishing sanctions to inflict maximum and lasting pain on Russia.
“We know people are concerned about the cost of living, but we are already providing support worth over £20 billion this financial year and next, including targeted support for energy bills, cutting the universal credit taper rate to help those on low incomes keep more of what they earn, and freezes to alcohol and fuel duties to keep costs down.”
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