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Parents face soaring living costs

Parents face soaring living costs

Category: Money

Updated: 05/07/2011
First Published: 05/07/2011

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Some families face a hike in living costs of almost a quarter this year, a report has warned.

The Joseph Rowntree Foundation (JRF) has found that parents with two children must each bring in at least £18,400 to provide an acceptable standard of living.

A number of factors, including cuts and freezes on benefits for childcare, have increased the amount parents must pull in each year.

It means that parents face having to increase their earnings by a quarter (24%) to cover a minimum budget.

"The cut in childcare support was particularly important. It means, for example, that someone with two children paying £200 weekly in childcare may have to contribute £60 rather than £40 to these costs – a 50% increase," said the report.

"Making up the shortfall would require an extra £1,000 a year in disposable income.

"To generate this would require additional gross earnings of about £3,700, with £1,200 then deducted in tax and National Insurance contributions and a reduction of £1,500 in tax credits.

"This helps to explain why a couple with two children, both parents working full time, would need to earn 24% more in 2011 than in 2010 to cover a minimum budget, once childcare costs are taken into account."

A single person needs to earn a pre-tax total of £15,000 to achieve an acceptable standard of living.

A lone parent with one child needs an annual income just shy of £18,250 each year.

Budgets for all groups have been squeezed as a result of rising food and utility prices, high inflation and pay freezes.

The report predicted that the marked rise in costs could put some families off work, increasing the pressure on the state.

"The squeeze in living standards caused by the combination of rising prices and stagnant incomes is hitting people on low incomes hard," said the report.

"This is partly because they face relatively high inflation rates, but also because of policy decisions that have restricted their net incomes.

"In particular, the reduction in support for childcare has made many low-earning families worse off. In the process, it has substantially reduced the incentive to work for relatively low pay for families who need to use childcare in order to do so."

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