Families with children will be worst hit financially over the next few years, according to a new report.
The Institute for Fiscal Studies research, commissioned by the Family and Parenting Institute, which examines the impact of tax and benefit reforms introduced between 2010 and 2014, reveals that families will be significantly worse off by 2015.
According to the research, on average a median (middle-income) household with children will see their income fall by 4.2 per cent in 2015-16. For a couple with two children this is the equivalent of a £1,250 less a year by 2015.
Families with more than two children, children under five and jobless lone parents will be most affected by the changes to tax and benefits and face the biggest drop in income, whereas couples with just one child will fair better.
The report, The Impact of Austerity Measures on Households with Children, lists reforms such as the abolition of the baby element of the Child Tax Credit and the reduction in the childcare component of the Working Tax Credit as having had the biggest impact on families with young children.
It estimates that a median household with a child under five-years-old will lose 4.9 per cent of their income by 2015-16, while lone parents not in employment will see their income fall by more than 12 per cent on average between 2010-11 and 2014-15, the equivalent of £2,000 per year.
Families with children in the poorest income bracket will lose the largest proportion of their income from tax and benefit changes. The report estimates that before taking the Universal Credit into account, the country’s poorest families will be 10 per cent worse off in 2014-15 than they would have been had no changes been made to the system. Even after the introduction of the Universal Credit, this group loses more than average.
As a result of this, the report claims that between 2010-11 and 2015-16, 500,000 more children will fall into absolute poverty as defined by the Child Poverty Act (2010), set at 60 per cent of the average income in 2010. Around 300,000 of these children will come from households where the youngest child is under five.
Ethnic minority groups, who tend to have more children per family, will also be affected. The research predicts that by 2015-16, the absolute and relative poverty rates for Pakistani and Bangladeshi children will increase by more than five percentage points.
Dr Katherine Rake, chief executive of the Family and Parenting Institute, said, ‘These figures reveal the full extent to which families with children are shouldering the burden of austerity. Having children has always been expensive. But now many families with children face an extra penalty of more than £1,000.
‘It is particularly surprising to see that some of the most vulnerable groups – such as families with new babies and lone parents out of work– are bearing the brunt of the tax and benefit reforms. Many families will be left struggling to understand why they have been singled out in this way and how this sits alongside the Government’s ambition for the UK to become a family friendly nation.’
According to the research, on average a median (middle-income) household with children will see their income fall by 4.2 per cent in 2015-16. For a couple with two children this is the equivalent of a £1,250 less a year by 2015.
Families with more than two children, children under five and jobless lone parents will be most affected by the changes to tax and benefits and face the biggest drop in income, whereas couples with just one child will fair better.
The report, The Impact of Austerity Measures on Households with Children, lists reforms such as the abolition of the baby element of the Child Tax Credit and the reduction in the childcare component of the Working Tax Credit as having had the biggest impact on families with young children.
It estimates that a median household with a child under five-years-old will lose 4.9 per cent of their income by 2015-16, while lone parents not in employment will see their income fall by more than 12 per cent on average between 2010-11 and 2014-15, the equivalent of £2,000 per year.
Families with children in the poorest income bracket will lose the largest proportion of their income from tax and benefit changes. The report estimates that before taking the Universal Credit into account, the country’s poorest families will be 10 per cent worse off in 2014-15 than they would have been had no changes been made to the system. Even after the introduction of the Universal Credit, this group loses more than average.
As a result of this, the report claims that between 2010-11 and 2015-16, 500,000 more children will fall into absolute poverty as defined by the Child Poverty Act (2010), set at 60 per cent of the average income in 2010. Around 300,000 of these children will come from households where the youngest child is under five.
Ethnic minority groups, who tend to have more children per family, will also be affected. The research predicts that by 2015-16, the absolute and relative poverty rates for Pakistani and Bangladeshi children will increase by more than five percentage points.
Dr Katherine Rake, chief executive of the Family and Parenting Institute, said, ‘These figures reveal the full extent to which families with children are shouldering the burden of austerity. Having children has always been expensive. But now many families with children face an extra penalty of more than £1,000.
‘It is particularly surprising to see that some of the most vulnerable groups – such as families with new babies and lone parents out of work– are bearing the brunt of the tax and benefit reforms. Many families will be left struggling to understand why they have been singled out in this way and how this sits alongside the Government’s ambition for the UK to become a family friendly nation.’
