Figure 1
LOW COST BUT ACCEPTABLE
1. PURPOSE AND
METHOD
1.1 The purpose of this evidence is to provide
reference points for Members of Parliament and Government, against
which proposals for modernisation of Britain's systems of personal
income taxation and social security benefits can be judgedwith
particular reference to Child Benefit, Working Families Tax Credit
and Integrated Child Credit. [13]
1.2 One of the Treasury's key objectives
is the elimination of child poverty, but it is unlikely that poverty
will be eliminated unless it is clearly defined and quantified.
In this report we use a methodology called budget standards
to estimate the living costs in October 2000 of a girl aged four
years, a boy aged eleven years and a boy aged sixteen years, at
a standard called Low Cost but Acceptable (LCA) and defined
as the poverty threshold.
1.3 The figure-work updates earlier research
by the Family Budget Unit, published in November 1998. [14]
That research estimated the living costs of one-parent and two-parent
families, each with a boy aged ten and a girl aged four years,
at a Low Cost but Acceptable (LCA) standard. The living costs
of the boy aged 16 years have been calculated separately, using
similar methods.
1.4 Finally, a word of warning. The purpose
of this evidence is to shed light on an extremely complex situationto
demonstrate its complexity and to point in the direction of change.
For too long living standards at the bottom of the income distribution
have had more to do with politics than objectively based assessments
of human need. The problem of poverty has also been clouded by
the use of equivalence scales derived from Family Expenditure
Surveys, [15]
on the questionable assumption that the money families on low
incomes spend is also the money they need to spend.
1.5 Needs and living costs are immensely
variable, even for households of similar composition. Social security
benefit levels, income tax allowances and other forms of income
maintenance are for Parliament to decide. Our purpose here is
to help inform the decision making process. In presenting this
evidence, we are not pretending that budget standards methodology
is the only way to ensure that social security benefits are sufficient
and that no household is taxed beyond its ability to pay. But
we do think budget standards could become a useful weapon in the
fight against poverty.
2. LIVING STANDARDS
DEFINED
2.1 Figure 2 illustrates the relationships
between three levels of living:
Level 1, The Poverty threshold
This level equates to the FBU's Low Cost but Acceptable
standard and is the subject of this evidence. Households with
incomes below LCA level risk poverty. The LCA logo (Figure 1)
encapsulates the LCA concept. The costs of education and healthcare
are excluded, on the assumption that they are freely and readily
available. But the costs of access to themtransport, school
uniforms, sports gear etcare included, as are the costs
of food, housing, fuel, clothing, personal care, household goods,
household services and leisure (including games and toys). Overall,
the budgets are designed to promote healthy, socially inclusive
living, in the UK, at the start of the second millennium.
Level 2, Modest But Adequate (MBA)
MBA represents the living standard at which most
householdsin a given country at a given period of timeaim
to live, including lower paid households. MBA is enough to "keep
up with the Jones's". Households at MBA level can afford
to live comfortably, run a car, avoid debt problems and take an
annual holiday. In the Netherlands, Scandinavia and Finland, a
similar standard, called Reasonable, is widely used.
Level 5, Affluence, is irrelevant
to this evidence.
13 HM Treasury, March 2000, Tackling Poverty and Making
Work Pay - Tax Credits for the 21st Century: The Modernisation
of Britain's Tax and Benefit System, No Six, HM Back
14
Hermione Parker (ed), 1998, Low Cost but Acceptable. A minimum
income standard for the UK: families with young children, Bristol:
The Policy Press. Back
15
Households Below Average Incomes (HBAI) equivalence ratios Back
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