Cost of raising a child tops £150,000

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Low-income families are struggling to meet the cost of raising a child, faced with the freeze to tax credits and the benefits cap.

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Low-paid working families are unable to provide an acceptable 'no frills' living standard, finds the research

According to research from the Child Poverty Action Group, it now costs £150,753 for a couple to raise a child up to the age of 18 and £183,335 for a lone parent.

The annual research by the charity sets out the amount families with children need to afford essentials such as food, clothes and shelter, as well as other costs necessary to participate in society, such as childcare, as perceived by members of the public.

It finds that despite the introduction of the National Living Wage, low-paid families working full-time are unable to earn enough to provide what the public defines as an acceptable, ‘no-frills’ living standard. Any gains from modest increases in wages have been clawed back through the freezing of tax credits.

Lone parents have been particularly hard hit due to the cumulative effect of cuts, frozen benefits and new ‘punitive’ measures, it says. According to the research, lone parents with a ‘reasonably’ paid job (on median earnings) are left 15 per cent short, the equivalent of £56 per week, of an adequate income because of the high cost of childcare.

A lone parent working full-time on the National Living Wage will be 20 per cent, or £74 per week, short of what they need to achieve a minimum standard of living, while a lone parent relying solely on benefits will be 40 per cent short.

However, compared to last year, the cost of a child for both couples and lone parents has marginally decreased.

Despite parents on universal credit being able to claim back 85 per cent of childcare costs, the reporting requirements are complex, and because the benefit is paid in arrears, it is hard for parents to pay childcare fees in advance, says the research.

It goes on to claim that the cost of a child is ‘heavily influenced’ by the cost of childcare, which is a ‘major strain’ on working low and middle-income families at a cost of £80,000 for a full-time childcare place over the course of childhood.

While CPAG recognises that the introduction of the 30 hours for three- and four-year-olds has helped, it claims that parents can face difficulties finding places. It also finds that low-income families facing high childcare costs often choose to limit their working hours, which reduces family income ‘significantly’.

The research, carried out by Loughborough University, finds that even families with two parents working full-time on the national living wage are 11 per cent short, the equivalent of £49 per week, of the income required to afford the essentials.

Families with three or more children fare worse. A third child born after 1 April 2017, for whom no additional support will be provided by the Government, costs around £86,500 or £4,800 a year excluding childcare.

Larger families on out-of-work benefits who avoid being hit by the two-child limit will be hit by the benefit cap instead. This restricts support to £23,000 in London and £20,000 outside London regardless of family size. CPAG says that the impact of the benefits cap means that an out-of-work family with three children living in a privately rented home will receive just a little over a third of what they need to meet their needs, with a shortfall of around £400 a week.

Alison Garnham, chief executive of Child Poverty Action Group, said, ‘Today, the majority of children growing up in poverty have working parents. While the number of parents in work is increasing, income from work alone is not sufficient to enable some to meet their families’ needs or escape poverty and the cost of a child is substantial.

‘There is strong public support for Government topping-up the wages of low-paid parents and investing in children is the best long-term investment we can make. By using the forthcoming budget to unfreeze benefits and restore work allowances, the Government can take steps towards making work really pay.’

The author of the report, Professor Donald Hirsch from Loughborough University, added, ‘Throughout the past decade, families in and out of work who rely on some public financial help to make ends meet have found things ever tougher, as neither tax credits nor benefits have risen in line with growing living costs.

‘The pain is not being evenly spread. Some families who work full-time, but on low pay, are relatively well-positioned to gain from a higher minimum wage and selective improvements in help with childcare. However, families with fewer working hours find it hard to access this help.

'Out of work families, together with working families with more than two children, are being hit hardest by ongoing cuts. Current policies will force an increasing number of families to live on less than half of what they need. This exceptionally harsh regime has been caused by the breaking of the relationship between family entitlements and family needs, under arbitrary cuts that leave some families close to destitution.’

A Government spokesperson said, 'We’re committed to ensuring that every child gets the very best chances in life. Household incomes have never been higher and there are one million fewer people living in absolute poverty than in 2010, including 300,000 children. 

'The employment rate is at a near record high and the National Living Wage has delivered the highest pay increase for the lowest paid in 20 years, worth £2,000 extra per year for a full-time worker. By increasing the tax-free personal allowance we are taking millions out of paying tax altogether. Meanwhile, we spend around £90billion a year on working-age welfare to support families in need.'

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