Page last updated at 23:04 GMT, Tuesday, 30 June 2009 00:04 UK

Costs hit low-income households

By Steve Schifferes
Economics reporter, BBC News

Unhappy child
The government has pledged to eradicate child poverty by 2020

The cost of living for those living on minimum household budgets is rising faster than inflation, the Joseph Rowntree Foundation has calculated.

It says that the costs for a single household on its low-income budget were up 5.3% this year, with rises of 5% for pensioners and couples with children.

The reason is that the poor spend more on fuel, food, and public transport, which have risen by 7% to 12%.

One in four households in the UK fall below Rowntree's minimun income levels.

The report warns that the benefits paid to working age people are well below minimum income standards.

The mood is not so much one of austerity, but of prudence
Joseph Rowntree Foundation

But it says that pensioners who get the full amount of pensioner credit do receive enough to meet the minimum income standard.

The think tank had created the benchmark measure last year in order to determine the income people need "to reach a minimum socially acceptable standard of living" which includes "having what you need to in order to have the opportunities and choice necessary to participate in society".

Single person: £166.47
Pensioner couple: £211.30
Couple with 2 children: £388.51
Lone parent with one child: £220.88
source: Joseph Rowntree Trust (excludes housing costs and childcare)

It is based on detailed survey evidence from the public about which items of expenditure are essentials.

Rowntree says that its preliminary findings suggest that despite the recession, the public "continue to believe that a minimum standard of living should allow people in Britain not just to survive, but to play a full part in society".

However, it points out that in tough economic times a growing number of people are concerned about whether they have enough income to meet the minimum acceptable standard of living.

And it warns that some people losing their jobs will have to survive on less than half of that minimum standard of living.

According to the report, a single person of working age would only receive benefits worth 42% of the minimum income needed, while a lone parent with one child would only receive 67% of the minimum.

And it says that the national minimum wage would have to rise by £1 per hour in order for it to provide enough money for to raise a single-earner household out of relative poverty.

Poverty line

The report is an attempt to raise the debate about the level of relative poverty in Britain beyond the government's official poverty line of 60% of average earnings - and as the government prepares to legislate to make legally binding its target of cutting child poverty in half by 2020.

It points out that on this relative measure, poverty is likely to have decreased or stabilised this year, simply because during the recession average earnings have stopped growing while benefits went up by 5% in April 2009 in line with the September 2008 inflation figure.

It says that "this apparently beneficial effect on the poverty figures does not represent a real improvement in the living standards of people on low incomes" because their cost of living is going up faster than for the average family.

And it warns their standard of living could fall if the inflation rate for those on minimum incomes continues to outstrip the general inflation rate.

Rowntree found that people in its focus groups continued to believe that everyone should have access to items that met key social needs, but there was a scaling down of how much should be spent to achieve these needs.

People thought some needs could be met through a more modest level of consumption, for example by shopping at discount supermarkets, or going out less frequently for meals or entertainment.

"The mood was not so much one of austerity, but of prudence," it said.

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