Low-income working families hardest hit by soaring inflation and benefits shake-up

24 November 2011

Low-income working families and their children face being pushed into greater hardship by soaring inflation and a proposed benefits shake-up, warns a new report by The Children’s Society.

The analysis shows that low-income working families spend a disproportionate amount of their income on food and heating, driving higher rates of inflation.

On average, a low-income family with children spends 20% more on fuel than a household on a higher income. In the past year alone, fuel costs have risen by 18.9%.

Plans 'will dramatically affect working and non-working families'

Government plans to break the link between inflation and benefit payments - by cutting the standard uprating of benefits - will dramatically affect working and non-working families with low incomes.  The plans, expected in the Chancellor’s autumn statement next week, could push thousands of children further into poverty.

Low income working families would be particularly affected by the changes. Analysis shows that inflation for low-income working families with children over the past year was around half a percent higher than the Consumer Price Index (CPI) figure, 5.7% compared to 5.2%.

'Tens of thousands more children risk being plunged into greater hardship'

The Children’s Society Chief Executive Bob Reitemeier said: 'If the government reduces the rate of benefit uprating, families already finding it hard to cope with spiralling costs will struggle to keep pace with rising inflation, pushing them over the edge. 

'Soaring fuel and food prices are already going to lead to a winter of discontent for low income families. If the Government decides to press ahead with plans to cut benefits and tax credit uprating, then future years could be even harder.

'This shake-up could mean the difference between families affording so many things that others take for granted - new shoes, clothes or a trip to the cinema.

'Tens of thousands more children risk being plunged into greater hardship. It is crucial that children in all low-income families are protected from rising inflation costs. The government must avoid making further savings off the backs of poor families that will scar the lives of far too many children.'

'Main driver of child poverty over the next decade'

The government announced last year that benefits and tax credits would be uprated with CPI as standard, rather than the typically higher Retail Price Index (RPI). The Institute for Fiscal Studies (IFS) argues that this change would be the main driver of child poverty over the next decade.

Changes to benefit uprating would affect the support available to thousands of families who receive child tax credit, working tax credit, council tax benefit and housing benefit. These changes will compound low earnings growth further, coming on top of previously announced freezes and changes to the welfare system.

Ends

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Notes to editors

The Children’s Society wants to create a society where children and young people are valued, respected and happy. We are committed to helping vulnerable and disadvantaged young people, including children in care and young runaways. We give a voice to disabled children, help young refugees to rebuild their lives and provide relief for young carers. Through our campaigns and research, we seek to influence policy and perceptions so that young people have a better chance in life.

i Of their expenditure. Families living in poverty spend 7.5% of their expenditure on fuel compared with 6.3% for households not in poverty.
ii Living Costs and Food Survey and Consumer Price Indices bulletins from the Office for National Statistics (ONS).
iii The year to September 2011