This report presents the 2011 update of the Minimum Income Standard (MIS), originally published in 2008. The standard is based on research into the items that members of the public, informed where relevant by expert knowledge, think should be covered by a household budget in order to achieve a minimum socially acceptable standard of living. Regular updates to the standard are based on research into what should be included in the minimum ‘basket’ of required goods and services, and on price changes that affect the cost of this basket. The 2011 update is based only on this second element, inflation.
Overall, the report shows that the minimum cost of living was about 5 per cent higher in 2011 than in 2010. This is only slightly ahead of general inflation, but several factors have combined to make it significantly harder for people to earn enough to reach the minimum. Minimum housing costs have gone up and support for childcare has reduced. Several other changes in benefits and tax credits have meant that, in particular, families with children need to earn significantly more in order to reach a given standard of living. Yet in practice, earnings have risen by less than general inflation, meaning that many people on low incomes are finding it substantially harder to make ends meet than a year ago.
- A single person needs to earn at least £15,000 a year before tax in 2011, to afford a minimum acceptable standard of living. A couple with a single earner and two children need at least £31,600.
- Inflation raised minimum household budget costs by around 5 per cent in the year to April 2011, slightly faster than the Government’s main inflation measure, the Consumer Prices Index (CPI). Over the past decade, the cost of a ‘minimum’ basket of goods and services has risen by 43 per cent, compared with 27 per cent for CPI.
- Out-of-work benefits remain well below people’s requirement for a minimum living standard, but pensioners claiming Pension Credit have incomes close to their minimum needs. Over the past three years, benefit levels have deteriorated relative to the income required to meet people’s minimum needs.
- The rise in personal tax allowances in April 2011 means that for a single person to afford the minimum, the wages required have increased by less than inflation.
- For families with children, by contrast, the earnings required to make ends meet have risen much faster than living costs, because Child Benefit has been frozen and tax credits reduced for many families. Most importantly, tax credits helping low-income families to cover childcare costs have been cut. Typically, families requiring childcare would have to earn over 20 per cent more in 2011 than in 2010 to meet the shortfall.
A minimum income standard for the UK in 2011. Donald Hirsch, Joseph Rowntree Foundation, 5 July 2011.