Benefits freeze adds to cost of raising children for low-income families

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The rising costs of raising a child are not being matched by increases in state support for families for the first time in post-war history, a study by the Child Poverty Action Group (CPAG) has found.

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CPAG has called on the Government to invest in families and end the benefits freeze in the autumn budget to help ordinary families with children meet rising costs.

The group’s annual ‘Cost of a Child’ report, written by Loughborough University’s Donald Hirsch, says inflation will drive the cost of a child up by 12 per cent in 2019 compared to 2012, while the benefits freeze will prevent more parents from being able to meet basic family costs.

The study found the freeze, first implemented in 2016, means a four per cent rise in the national living wage this year has not prevented a growing gap between income and costs.

Parents working full time on the national living wage are still £59 a week short of the income needed to give children an acceptable minimum living standard, according to the report, while single parents working full time on the same wage are £68 per week short. This is double the shortfall an equivalent family faced in 2012. 

The freeze has lost working and non-working families £7.30 per week for their first child and £5.80 per week for their second and third child, the report found.

For couples, child benefit plus the maximum amount of Child Tax Credit now covers 94 per cent of the basic cost of a child compared to 98 per cent last year. For single parents, the proportion is 69 per cent compared to 72 per cent last year.

Chief executive of CPAG Alison Garnham said, ‘With the return of inflation, the benefits freeze has become toxic for struggling families. Rather than prioritising tax cuts which help the better off, the Chancellor should use the autumn budget to invest in helping families with children. Ending the benefits freeze should be the first step he takes to re-balance the finances of ordinary families.’

The report says the minimum overall cost to a couple bringing up a child from birth to 18, including rent, childcare and council tax, is now £155,142, up from £151,600 in 2015-16. For lone parents, the cost is now £187,120, up from £182,589.

Author of the report Professor Hirsch said, ‘After a lull in inflation, the cost of essentials is once again rising. For the first time in post-war history, these cost increases are not being matched by increases in support given to families from the state. While this policy persists, the struggle that low-income families face to make ends meet will become steadily harder, especially because it is being combined with numerous other cuts including the benefit cap and the bedroom tax.’

The report added that on top of the general freeze on working age benefits, new families both in and out of work with an eldest child born after 6 April this year have lost an extra £10.45 per week as a result of the scrapping of the ‘family element’ of child tax credit and the equivalent in universal credit.
 
In addition, third or subsequent children have lost £53.20 per week of child tax credit following the ‘two child limit’ imposed on claimants.
 
The report does suggest that working families with childcare costs may benefit from the raising of tax allowances, increases in the minimum wage and from the 30 hours ‘free childcare’ to be introduced later this year. However, it concludes, ‘none of these measures are proving adequate to reverse the effects of benefit cuts, partly because they are not well targeted on low-income families.’

Neil Leitch, chief executive of the Pre-school Learning Alliance, said,The report highlights that working families may potentially benefit from the 30 hours “free childcare” policy coming into force in September, arguing that increasing support for the costs of childcare could offset benefits cuts for those in work.

‘However, in spite of recognising that this measure will not work in isolation, the report does not acknowledge the problems of underfunding affecting the 30 hours scheme, which could potentially limit the availability of childcare places and even mean increased costs for parents who are already struggling.

‘Indeed, parents may well find themselves out of pocket as a result of the scheme, as childcare providers are forced to increase costs elsewhere to make up the shortfall in government funding of the offer.

‘If the government is serious about improving the lives of those who are “just about managing”, then they must invest what is needed to ensure that neither providers, nor parents suffer financially as a result of this policy.’

The report can be viewed here www.cpag.org.uk/cost

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