Poor Suffer as Living Costs Rise 25%

Living costs have risen 25% in the past five years and placed an "unprecedented" financial burden on the poor, a report has found.

The Joseph Rowntree Foundation (JRF) said rising childcare and energy costs, coupled with stagnating wages and benefit cuts, widened the poverty gap.

Worst affected are pensioners and single people, it said.

The government said it has "taken action" and universal credits would make three million people better off.

The Minimum Income Standard (MIS), released on Friday, looks into goods and services the public think people need in order to have a minimum acceptable standard of living.

Report author Donald Hirsch said: "From this April, for the first time since the 1930s, benefits are being cut in real terms by not being linked to inflation.

"This combined with falling real wages means that the next election is likely to be the first since 1931 when living standards are lower than at the last one."

"This year's report demonstrates how the price of a basket of goods needed for an acceptable living standard has risen far faster than average inflation.

"This has combined with low pay increases to create a widening gap between income and needs."

Deepening poverty

The basket of goods used to judge these figures include day-to-day products such as the weekly food shop and clothing, as well as single-purchase treats such as holidays.

Cuts to benefits and tax credits... combined with stagnant wages and the rising cost of essentials is resulting in an unprecedented erosion of living standards”

Katie SchmueckerJRF policy and research manager

Everyday items found in most homes, from cleaning products to household furnishings, have also been accounted for and broken down to make the total annual figure.

Since 2008 the JRF said real inflation had climbed by 25% rather than the 17% increase as judged by the Consumer Price Index (CPI), the method used by government.

It also found that in the past 12 months pensioners, and those living alone, had been hit hardest with 4.2% increases in their costs compared with the 2.4% rise as indicated by the CPI.

A couple with two children have seen the cost of living rise to 3.7% and lone parents with one child to 3.3%.

Freezing child benefit, tax credits "uprated" by 1% and the increase in the cost of essentials, it added, meant a working couple with two children will be £230 worse off a year, a working lone parent £223 and a single person worse off by £49 per year.

This comes on the back of another report, published by the Office of the Children's Commissioner for England, that said an additional 500,000 children will be pushed into poverty by 2015 on the back of government spending cuts as well as tax and benefit changes.

Stagnant wages

Katie Schmuecker, policy and research manager at the anti-poverty think tank, JRF, said: "The public have told us their everyday costs have soared above wage levels, driving up the amount they need to make ends meet.

"Cuts to benefits and tax credits, especially cuts to support for childcare, combined with stagnant wages and the rising cost of essentials is resulting in an unprecedented erosion of living standards."

The JRF said a single person now needs to earn £16,850 a year, a working couple with two children needs to earn £19,400 each, and a lone parent requires earnings of £25,600, in order to meet basic needs.

A full-time worker on the national minimum wage earns around £13,000.

A government spokesman said: "The dynamic and behavioural changes that will result from our tax and welfare reforms will help improve the lives of some of the poorest families in our communities.

"The government has already taken action to help families with the cost of living, including: increasing the tax-free personal allowance to £10,000, which will save a typical taxpayer over £700; freezing council tax for five years, saving a typical household £600; and freezing fuel duty which has helped to keep fuel prices 13 pence per litre lower than they would otherwise have been.

"Furthermore, our welfare reforms with the introduction of the Universal Credit will make three million household better off - the majority of these from the bottom two fifths of the income scale."

Sam Bowman, research director at the free-market group the Adam Smith Institute, added: "The JRF are right to highlight the fact that rises to the cost of living tend to hit the poorest the hardest.

"I think it's probably a mistake, however, to point to benefits cuts as the main causes of this squeeze."