Lindsay Judge examines new research into the cost of bringing up a child and highlights the cumulative pressures on families’ living standards in recent years as a result of rising costs, sluggish earnings and the stealthy decline in state support. The questions of both how and how much public policy should help families with the cost of a child is a topic ripe for political debate at the next election.
How much does it cost to bring up a child in the UK today? The question is far more important than the lifestyle issue it is often presented as, and is likely to be a critical one in the ‘living standards election’ of 2015.
A new report written by Donald Hirsch of Loughborough University and published this week by Child Poverty Action Group and Joseph Rowntree Foundation provides the analysis needed to answer the question intelligently. It draws on the minimum income standards project which regularly asks members of the public what they regard as the essential items we should all be able to afford, then costs these up and works out what difference the presence of each additional child makes to the required family budget.
The numbers are enough to make any policy maker sit up and think: the minimum additional cost of a child is £81,722 over 18 years for couple, and £90,980 for a single parent (with single parents experiencing higher costs due to the fact that there is only one adult in the family to offset some of the children’s costs by reducing their own). Add in childcare and the numbers increase significantly – to £148,105 for couples, and a staggering £161,260 for single parents, over the 18 year period.
The figures graphically illustrate why families with children generally have an increased risk of poverty than other groups in society: put simply, they have a higher level of costs yet going out to work to cover these costs too. Without adequate support, it is not hard to understand why families on low to median incomes often find themselves struggling to keep their heads above water.
Enter the welfare state, and in particular child benefit, designed to help parents smooth the costs attached to children over the course of their working lives. As the new report shows, child benefit covers a not insignificant 19% of the costs of a child for couples, and 17% for single parents. But its contribution is being eroded: in the past three years, child benefit has lost one-seventh of its value as a result of being frozen. In addition, since January 2013, families with one member earning over £50,000 a year see their child benefit rapidly tapered away, and by the £60,000 mark receive no help with children’s costs from the government at all.
Child benefit is not the only source of state support that poorer families can currently claim with the costs of their children however. Means-tested child tax credit covers a decent chunk for families with low incomes, but still leaves them some way short of an adequate standard of living. As the research illustrates, taken together, the full child tax credit entitlement plus child benefit comprises 85 per cent of the minimum costs of a child for couples, and 77 per cent for single parents. The shortfall has to be absorbed by the adults – or the child goes without.
And if levels of support for children are inadequate, they still remain more generous than working-age benefits which cover even less of an adult’s minimum requirements. As a result, while children’s benefits may cover a largish proportion of the costs of a child, total family income for those in the bottom half of the distribution rarely reaches an adequate level. Perhaps one of the most shocking facts in the report is that a couple with two children working full time on the national minimum wage only nets 83 per cent of the minimum income they require. Even for couples on the median wage, the margins are very slim indeed.
The picture will change as families are migrated onto universal credit (UC) from October this year. While the (in)adequacy of out-of-work benefits will remain the same, the level of in-work support that UC offers will differ from the current system depending on family type and income level. Overall, as families work more hours under UC, the gains they net diminish. While a couple working full-time on the minimum wage will be marginally better of under UC than the current system, a single parent in the same situation will be substantially worse off, undermining the claim that work will always pay.
Part of the reason work is often not an economically compelling option for parents is that childcare costs remain so high in the UK, adding a further 40 per cent to the costs of a child in 2013. Despite the fact that parents claiming working tax credit (and subsequently universal credit) see 70 per cent of their childcare costs rebated, for many, childcare remains prohibitively expensive. While the government is currently consulting on new childcare schemes for parents across the income spectrum, whether this will adequately address the problem our report highlights remains to be seen.
Overall, the research highlights the cumulative pressures on families’ living standards in recent years as a result of rising costs, sluggish earnings and the stealthy decline in state support. With the government increasingly speaking of children as private luxuries rather than a national asset, the questions of both how and how much public policy should help families with the cost of a child is a topic ripe for political debate at the next election.
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Lindsay Judge is Senior Policy Officer at Child Poverty Action Group.