At £7.20 an hour (for over 25s), the Government’s National Living Wage is currently £1.05 lower than the level recommended by the Living Wage Foundation.
The idea of expanding the free entitlement is welcomed as one way of tackling rising childcare costs, but the report questions how far that will go to help families.
According to the ‘Cost of a Child in 2016’, published by Child Poverty Action Group today (Thursday), it is feared that some providers may not be able to afford to offer the extra hours due to insufficient government funding.
The DfE is currently consulting on the Early Years National Funding Formula, which is designed to make the free entitlement funding fairer across settings, while investing an extra £300m into the expansion.
The report is the fifth in an annual series examining shifting public views on requirements for a basic standard of living, and highlights how the post austerity, families are taking measures towards a ‘no frills’ way of life.
On the other hand, more expensive nursery care and after-school activities are featuring more heavily as a minimum expectation.
Alison Garnham, the charity’s chief executive, said, ‘The research for our Cost of a Child project draws on what members of the public think is required for a minimum budget - rather than for a life of ease.
‘Our findings show that the new National Living Wage is not enough to offset what has become a toxic mix of high housing and childcare costs combined with cuts to family support.’
Ms Garnham added, ‘It’s especially hard for lone parents, who have only one income, to get by, compared to couple-families.
‘Our new prime minister wants the country to work for everyone.
‘We will need re-investment in children’s benefits and in a real living wage and action to tackle high housing and childcare costs if it’s to work for ordinary families.’
As director of Loughborough University’s Research Centre for Social Policy Research, report author Professor Donald Hirsch, is also responsible for the Living Wage Foundation’s calculations.
'The Government's National Living Wage is certainly a welcome advance in making pay more adequate, but it is not calculated with reference to the costs that families actually face,' said Prof Hirsch.
'Our research, which is being used by the Living Wage Foundation to inform its accredited living wage, suggests that incomes need to be higher than can be earned through the official National Living Wage in order to meet children's needs.'
The Living Wage Commission, appointed by the Foundation, is about to publish a new report on the evidence for a true living wage.
He added, 'To be meaningful and sustainable, it is important that a living wage should be evidence-based.'
Other key findings:
- Families with two parents working full time on the Government’s version of the living wage, are falling 12 per cent short - £50 per week - of the defined-by-the-public basic living standards.
- However, for these families, since 2012 disposable income has grown by 4 per cent.
- For lone parents working full time on the National Living Wage, the shortfall is worse at 16 per cent.
- For these families, disposable income has fallen by 6 per cent over the same period.
- The minimum cost of a child from birth to 18 is now £151,600 for a couple - a slight increase (1.2 per cent) on 2014-15.
- For lone parents the cost is £182,589 – a 9 per cent jump on the previous year.
- Child benefit plus maximum child tax credit together cover only 72 per cent of the costs of a child for lone parents, compared to 98 per cent for two-parent families.
- The gap between the living standards of couple and lone parent families is growing, driven by increased childcare costs, and will grow further under universal credit (cuts hitting lone parents harder, and the living wage is not enough to counter the trend).
- Even on a median income, lone parents are more than 10 per cent short of an adequate income even with a reasonably paid job, burdened particularly by the high cost of childcare.
- For a couple with two young children on the other hand, median wages are enough to pull the family 10 per cent above a minimum living standard (this includes basics such as food, clothing and heating as well as the ability to participate in society, for example being able to go on a school trip or have at least a week’s simple holiday in the UK each year with your family).
- The basic cost of a child up to age 18, that is, excluding childcare, council tax and housing - was £72, 596 in 2015 - 2016 for a couple (a 13.8 per cent drop on the previous year).
- For lone parents the 2015-16 basic cost was £99,035 - up 1.5 per cent on the previous year.
- Cost burden predicted to intensify for low-income families if inflation and rent levels rise, forcing families to find accommodation further away from their workplace.
While some benefit reforms are expected to ease family budgets, such as the extra help with childcare costs in universal credit - others will tighten family budgets further. These include:
- Cuts in the universal credit work allowance (ie the earnings level at which universal credit starts to be withdrawn) will leave couples on UC up to £19.50 per month worse off. For single parents the loss is up to £46.15 per month.
- All families making new Child Tax Credit (CTC) claims will get £10.45 a week less with the abolition of the family element of CTC – a 7 per cent reduction in the proportion of costs covered by benefits for the first two children of a couple.
- Child Tax Credit will no longer be paid for third and subsequent children born after 2017.
- The reduction of the benefit cap to £20,000 outside London and £23,000 in London will make life even tougher for large families and those with high housing costs who are out of work and already struggling with not much more than half of what the public deems necessary for them to have a minimum acceptable living standard.
- Some other families will have their benefits reduced because they are subject to the bedroom tax or because the only private accommodation they can find is at a rent above the level covered by housing benefit.
A Government spokesman said, 'We are committed to building an economy that works for everyone. That’s why we have given over a million people in Britain a pay rise with the introduction of the National Living Wage, frozen fuel duty, and raised the personal tax allowance.
'We are supporting parents by making sure that affordable good-quality childcare is available for all and we continue to spend around £90bn a year to ensure a strong safety net for the most vulnerable.”