APPENDIX 7
Memorandum submitted by the Family Budget
Unit (ICC 16)
THE LIVING COSTS OF CHILDREN AT THE POVERTY
LINE
Girl aged 4 years Boy aged 10 years Boy aged
16 years
The Family Budget Unit
The Family Budget Unit (FBU) is an educational
charity (No 298813) and private limited company (No 221 1830),
founded in 1987 and currently based in the Department of Nutrition
and Dietetics, King's College London, 150 Stamford Street, London
SE1 8WA.
The Family Budget Unit has three main
objectives:
— To advance the education of the public
in all matters relating to comparative living standards and living
costs throughout the United Kingdom;
— To carry out research into the economic
requirements and consumer preferences of families of different
composition, for each main components of a typical family budget;
— To publish the useful results of
such work.
Living standards measured. Budgets are
produced at a Modest But Adequate (MBA) and at a Low Cost but
Acceptable (LCA) standard. Modest But Adequate, or Reasonable,
is defined as the standard at which most households aim. Low Cost
but Acceptable marks the poverty threshold.
Methodology. Budgets are calculated using
a computerised version of the budget standards methodology pioneered
by Joseph Rowntree for his study of poverty in York (1901)—for
a range of household types and across the life cycle. The resulting
expenditure totals are grossed up for income tax and NI contributions,
less any social security benefits to which the households have
entitlement, to show the gross earnings / retirement incomes required
to reach the given standard.
Hermione Parker is Director of the Family Budget
Unit.
Dr Michael Nelson is Deputy Director of the Family
Budget Unit.
Dr Nina Oldfield is Senior Research Officer with
specialist experience in the costs of children.
Abbreviations Used
| FBU: | Family Budget Unit
|
| DSS: | Department of Social Security
|
| HBAI: | Households below average incomes
|
| LCA: | Low Cost but Acceptable
|
| MBA: | Modest But Adequate |
| NI: | National Insurance |
| NMW: | National minimum wage
|
| RPI: | Retail Prices Index |
| WFTC: | Working Families' Tax Credit
|
| |
SUMMARY
1. Purpose. The purpose of this evidence is to
estimate the living costs, in October 2000, of a boy aged 16 years,
a boy aged 10 years and a girl aged 4 years, at a living standard
called Low Cost but Acceptable (LCA) and defined as the poverty
threshold.
2. Method. The method used is called Budget Standards.
These are specified baskets of goods and services which, when
priced, can represent predefined living standards. The standards
generally regarded as most useful are Low Cost but Acceptable
(LCA), representating the poverty threshold, and Modest But Adequate
(MBA), representing the level of living at which most households
aim. For the two younger children this evidence disaggregates
and updates the living costs of children defined in an earlier
Family Budget Unit report. [11]
The child components are: food, clothing, personal care, household
goods, household services, leisure, housing, fuel, and childcare.
3. Findings. In October 2000, at the LCA standard,
the estimated, average weekly costs of girls and boys in the assumed
circumstances, were as follows. Further details are in Table 3.
| Child | | Child costs including childminding
£ week
|
| Girl aged 4 years | no childminding
| 27.74 |
| Girl aged 4 years | 29.3 hours childminding
| 91.95 |
| Girl aged 4 years | 13.4 hours childminding
| 57.04 |
| Boy aged 10 years | no childminding
| 36.60 |
| Boy aged 10 years | 11.5 hours childminding
| 61.73 |
| Boy aged 10 years | 3.2 hours childminding
| 43.69 |
| Boy aged 16 years | no childminding
| 55.94 |
| | |
4. Two causes for concern
— Many lower paid households face higher living
costs than those assumed for this report:
higher rents, higher fuel costs, higher travel costs and higher
childminding charges.
— For households with childminding costs, the poverty
trap effects of WFTC can now extend above average earnings. For
example: assuming a private sector rent of £99.90, council
tax at £11.10 and childcare costs of £100.00 a week,
a lone mother with two children aged 4 and 6 years needs to earn
£550 a week before her marginal tax rate falls below 64.9
per cent. [12]
5. Four policy recommendations
5.1 That budget standard estimates of household needs
and costs be taken into account by Parliament whenever legislation
or regulations affecting living standards are proposed.
5.2 That the estimated costs of each parent and each
child be disaggregated.
5.3 That the redistributive and poverty trap effects
of tax and benefit changes be made explicit.
5.4 That equivalence scales derived from Family Expenditure
Surveys cease to be used to measure relative need, since low-income
families cannot spend money they do not have.
11
Hermione Parker (ed), 1998, Low Cost but Acceptable. A minimum
income standard for the UK: families with young children, Bristol:
The Policy Press Back
12
DSS Tax Benefit Model Tables, June 2000, Table 1. Back
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