Majority of UK children will be living below the breadline by 2015

date: 11 March 2013

embargo: 00.01hrs Wednesday 13 March 2013

Government welfare and tax changes, together with lower than forecast wage growth, will leave the majority of children in the UK living in families below the breadline by 2015, according to new TUC research published ahead of its A Future For Families rally in central London later today (Wednesday).

Tax and welfare reforms alone - both existing and future changes - will be responsible for nearly half a million more children living below the breadline, says the TUC.

A Bleak Future For Families - a TUC report based on analysis by Howard Reed of Landman Economics - examines the current and future impact of various benefit and welfare changes, including Universal Credit, direct and indirect tax changes and real wage growth since 2010 on the incomes of different households and family types.

The research finds that the cumulative impact of government policies and slower than forecast wage growth over the course of this parliament will mean that 690,000 more children will be living below the minimum income standard - the level of income needed to achieve a minimum acceptable standard of living in the UK - by 2015.

Minimum income standards (MIS), widely accepted and established by the Joseph Rowntree Foundation in 2008, vary by family type. For example, the current MIS for a single pensioner is £12,623, rising to £23,992 for a single parent with two children and £24,643 for a couple with one child.

Tax and welfare changes, including tax credit cuts, the VAT rise and the increase in the personal allowance, will have the biggest net impact in terms of increasing the number of children whose families are struggling to make ends meet - pushing 460,000 more children below the breadline by 2015.

Slower than initially forecast wage growth over the course of this parliament pushes another 170,000 below the minimum income standard, while the pay freeze and cap for public sector workers will see 80,000 more children falling into hardship.

When all these changes are taken into account, Universal Credit - the government's flagship welfare scheme designed to tackle poverty and make work pay - will only lift 20,000 children above the MIS, says the research.

The research shows that an extra one million families will be living below the minimum income standard by 2015, compared to where they would have been under the policies and forecasts the government inherited in 2010. The majority (54.4 per cent) of children will be living below the MIS in two years time, says the TUC.

A Bleak Future For Families shows that nine in ten families will be worse off by 2015, with only the poorest ten per cent of households better off - and then only by a measly 57p a week. A middle income household will be nearly £1,200 a year worse off by 2015 - a 6.6 per cent cut in their income - with the biggest single loss as a result of tax credit cuts (-£505).

The research shows that while all bar the top ten per cent of households are net gainers as a result of changes to the personal allowance and the primary threshold for national insurance, all these gains are wiped out by the VAT rise in 2011. The poorest ten per cent of households gain just a penny a week from direct tax cuts but lose £3.38 by the VAT rise.

While the government has justified welfare cuts by saying that they target those out of work, working families are also hit hard by government austerity policies, says the research. Working lone parents are set to lose the equivalent of 8.2 per cent of their total income - far more than the median household loss of 6.6 per cent - mainly as result of tax credit cuts.

Households in Wales (-7.2 per cent) and Yorkshire and the Humber (-6.9 per cent) will suffer the sharpest loss in incomes. This is partly due to the higher than average concentration of public sector workers in these regions, who are facing the biggest real terms cut in their wage packets.

The research comes ahead of a TUC-organised rally in central London this evening, in which various union leaders and campaigners will urge the Chancellor to deliver a Budget next week that prioritises jobs, growth and families.

Speakers at the rally - which takes place at the Emmanuel Centre in Westminster between 6-8pm this evening ­- include TUC General Secretary Frances O'Grady, Shelter Chief Executive Campbell Robb, Child Poverty Action Group Chief Executive Alison Garnham and Deputy Leader of the Labour Party Harriet Harman MP.

TUC General Secretary Frances O'Grady said: 'Families are suffering the tightest squeeze in their living standards in nearly a century. On top of wages that do not keep up with prices, government policies are making life even more miserable for millions of low to middle-income families through tax increases and cuts in benefits and tax credits.

'By the 2015 election, the majority of children in Britain will be living below the breadline. For any civilised society, that should be shaming.

'But while the Prime Minister says there is no alternative, the truth is that support is growing for a new approach. The Budget should start from recognising that what Britain faces is a growth, jobs and living standards crisis. Rather than targeting tax cuts at millionaires, cutting VAT would benefit everyone, and would help poorer households far more than raising the personal allowance.'

NOTES TO EDITORS:

Impact of real wage growth, tax and welfare changes on number of children under the Minimum Income Standard by 2015

Policies	Change in number of children below MIS
Tax, tax credit and benefit reforms (except Universal Credit)	+460,000
Wage growth to 2015	+170,000
Wage growth restrictions for public sector workers	+80,000
Universal Credit	-20,000
Total	+690,000

Baseline for government policies is May 2010. Real wage growth compared to Office for Budget Responsibility forecast from June 2010 with the 2012 Autumn Statement.

Impact of wage growth, benefit, tax credit, universal credit, direct tax and VAT changes on weekly household disposable income by 2015

Income decile	Benefit reforms	Tax credit reforms	Universal Credit	Income tax and National Insurance	VAT	Reduced wage growth	Public sector wage policy
1 (poorest)	-£1.64	-£0.82	£6.85	£0.01	-£3.38	-£0.37	-£0.08
2	-£5.75	-£4.13	£0.13	£1.09	-£4.26	-£0.73	-£0.21
3	-£5.50	-£7.05	£0.55	£2.90	-£5.46	-£1.02	-£0.40
4	-£4.05	-£9.60	-£0.65	£4.16	-£6.68	-£1.81	-£0.64
5	-£3.59	-£9.72	-£1.87	£5.14	-£8.48	-£3.09	-£1.21
6	-£3.41	-£8.04	-£3.27	£5.87	-£10.46	-£4.67	-£2.31
7	-£3.42	-£6.13	-£2.77	£6.53	-£11.24	-£7.30	-£4.81
8	-£3.66	-£3.57	-£1.46	£6.78	-£13.69	-£10.86	-£9.14
9	-£4.23	-£0.85	-£0.58	£5.42	-£14.53	-£15.38	-£14.96
10 (richest)	-£7.78	-£0.06	-£1.79	-£4.58	-£19.92	-£23.61	£21.96

Cumulative impact of policy changes and wage growth on annual household disposable income by 2015

Income decile	Total benefit changes (weekly)	Total tax changes (weekly)	Total wage change (weekly)	Total impact (weekly)	Total impact (annual)	Total impact as proportion of income
1	£4.39	-£3.37	-£0.45	£0.57	£29.64	1.1%
2	-£9.75	-£3.17	-£0.94	-£13.86	-£720.72	-7.1%
3	-£12.00	-£2.56	-£1.42	-£15.98	-£830.96	-5.9%
4	-£14.30	-£2.52	-£2.45	-£19.27	-£1,002.04	-6.3%
5	-£15.18	-£3.34	-£4.30	-£22.82	-£1,186.64	-6.6%
6	-£14.72	-£4.59	-£6.98	-£26.29	-£1,367.08	-6.9%
7	-£12.32	-£4.71	-£12.11	-£29.14	-£1,515.28	-6.6%
8	-£8.69	-£6.91	-£20.00	-£35.60	-£1,851.20	-6.6%
9	-£5.66	-£9.11	-£30.34	-£45.11	-£2,345.72	-6.7%
10	-£9.63	-£24.50	-£45.57	-£79.70	-£4,144.40	-6.3%

- A Bleak Future For Families is available at www.tuc.org.uk/Bleakfutureforfamilies

- An infographic illustrating the impact of austerity on median income households is also available at http://bit.ly/14N6ulv

- A Future For Families takes place between 6pm-8pm on Wednesday 13 March (doors open at 5.30pm) at the Emmanuel Centre, 9-23 Marsham Street SW1P 3DW.

- More information about the rally and the TUC's A Future that Works campaign can be found at http://afuturethatworks.org/

- Further information on the minimum income standard can be found at www.minimumincomestandard.org

- All TUC press releases can be found at www.tuc.org.uk

- Follow the TUC on Twitter: @tucnews

Contacts:

Media enquiries:
Liz Chinchen T: 020 7467 1248 M: 07778 158175 E: media@tuc.org.uk
Rob Holdsworth T: 020 7467 1372 M: 07717 531150 E: rholdsworth@tuc.org.uk
Alex Rossiter T: 020 7467 1337 M: 07887 572130 E: arossiter@tuc.org.uk