Low-income parents on the brink of a 'financial family crisis'

Now in its fourth year, ‘The Cost of a Child’ by Loughborough University for the Child Poverty Action Group, examines the costs associated with raising children.

According to the 2015 report, the minimum cost of raising a child from birth to age 18 has risen by five per cent since 2012 to £149,805.

The calculation is made using the 'minimum income standard' for he UK, which is drawn on research with members of the public about what they think the  goods and services a family would need in order to reach a minimum acceptable standard of living. They include basic costs, such as food, clothing and heating bills and other items, such as buying birthday presents and taking a week’s self-catering holiday in the UK once a year.

It finds that incomes for families with two children where both parents work full-time and earn the national minimum wage fall 16 per cent short of the basic amount needed to provide a minimum standard of living. This is the equivalent of a £75.75 gap per week

It concludes that while the cost of a child is set to rise less steeply in future years, a sharp decline in state support as a result of Government policies, will create a net loss for most low-income families.

The report lists several measures from the Summer 2015 Budget expected to make it harder for families, they include a four-year freeze on working age benefits, cuts to the amount parents can earn before claiming tax credits and the move to limit tax credits to two children from 2017.

While it welcomes the new national living wage, it claims it will only work to offset cuts to benefits.

The report goes on to say the increase from 15 to 30 hours of free childcare is good news, but warns the support will not be available for families receiving tax credits. Also, limits on funding paid to settings to provide the free hours could leave many parents having to bear ongoing cost increases in childcare.

'The Cost of a Child 2015' also outlines the financial effect of cuts in benefits to non-working families.

Author of the report Donald Hirsch said, 'With low inflation, the cost of raising children has stopped growing, but many families still lack the incomes they need to afford even the basics. Over the next five years, some of the most vulnerable families will see support for meeting these costs reduce, sometimes leaving them with less than half of their family's minimum needs if they are not working. 

'The hardest hit will be larger families - the punishment for falling on hard times if you have more than two children will be something close to destitution. However, even with two children, many families with anything more than a very modest rent will hit the new Benefit Cap levels, and have their benefits reduced to levels that make it ever tougher just to get by.'

Alison Garnham, chief executive of CPAG, said, ‘Low inflation helped keep the cost of a child relatively flat last year but the barrage of cuts announced in the Budget will batter modest and low-income family budgets, making it very much harder to afford even bottom-line, basic children’s costs.

‘Shockingly, even couple-parents - both working full time on the current minimum wage  - are already well short of what they need for no-frills basics.   

‘One in four children lives in poverty in the UK and the oncoming social security cuts will push the number higher – at greater cost to the taxpayer.  We should be backing parents’ efforts to build a future with prospects for their children, not consigning them to financial misery and narrow horizons.   

‘The Government should invest in a real living wage and give children’s benefits the ‘triple lock’ protection that pensions enjoy.’