BENEFIT FREEZES AND “POVERTY PREMIUM” LEAVE STRUGGLING FAMILIES OUT IN THE COLD
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 from End Child Poverty 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 are having to pay a premium for the essentials, despite being least able to afford them. 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 through the winter. One parent told the coalition: ‘Most months I have to decide what is more important: clothes for me or my child, or heating.’
End Child Poverty is calling on the Government to take action by ending the current four-year freeze on children’s benefits, and by increasing help with housing costs in line with local rents.
The coalition is also calling on the Government to establish a commission to explore how businesses can ensure that their customers on a low income do not 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. Too often, families are facing impossible choices between feeding their children and heating their home.
“The Government needs to take action now, to lift the four year freeze on children’s benefits, and to ensure that the highest prices for family essentials aren’t paid by those who can least afford them.”
Today, the End Child Poverty coalition is launching a new “Feeling the Pinch” (www.endchildpoverty.org.uk/feeling-the-pinch/) campaign to call on the Government to unfreeze children’s benefits, and to take action to end the poverty premium.
Notes to editors:
• The End Child Poverty coalition (www.endchildpoverty.org.uk) is made up of around 100 organisations from civic society including children’s charities, child welfare organisations, social justice groups, faith groups, trade unions and others, united in our vision of a UK free of child poverty. These include Buttle UK, Child Poverty Action Group, The Children’s Society, Family Action, Barnardo’s, Gingerbread, Oxfam, Action for Children, TUC, Family and Childcare Trust, Save the Children, and the National Children’s Bureau.
• For press enquiries, please contact Kate Goddard: kate@endchildpoverty.org.uk or 07918 567577.
• The “Feeling the Pinch” report can be found at (www.endchildpoverty.org.uk/feeling-the-pinch/For an advance embargoed copy of the report, please contact Kate Goddard, kate@endchildpoverty.org.uk
• Parents were surveyed by coalition member Buttle UK. Buttle UK provide grants and support that give children in crisis a chance for change, see www.buttleuk.org
• There is currently a four- year freeze in place on most key children’s benefits, which means that rates of support will not rise further until at least 2020. The Child element of Child Tax Credit and Child Benefit are both included in this freeze.
• 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.
Poverty premium in 2016
| Typical cost | Cost to low-income family* | Difference | |
| Loan for £500 | £500 | £944.84 | £444.84 |
| Basic household item: cooker | £237.33 | £780 | £542.67 |
| Cost to cash three £200 cheques | £0 | £49.50 | £49.50 |
| Annual electricity and gas bill combined | £1,249.55 | £1,320.95 | £71.40 |
| Home contents insurance | £45.87 | £53.11 | £7.24 |
| Car insurance | £470.04 | £1,010.63 | £540.59 |
| Total | £2,502.79 | £4,159.03 | £1,656.24 |
