Select Committee on Social Security Appendices to the Minutes of Evidence


Memorandum submitted by the Family Budget Unit (ICC 16)


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


  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.

ChildChild costs including childminding

£ week
Girl aged 4 yearsno childminding 27.74
Girl aged 4 years29.3 hours childminding 91.95
Girl aged 4 years13.4 hours childminding 57.04
Boy aged 10 yearsno childminding 36.60
Boy aged 10 years11.5 hours childminding 61.73
Boy aged 10 years3.2 hours childminding 43.69
Boy aged 16 yearsno 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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