How is public policy affecting people’s ability to make ends meet?

How is public policy
affecting people’s ability
to make ends meet?
Donald Hirsch
Centre for Research in Social Policy
November 2017

The Minimum Income Standard (MIS) represents what families need for
an acceptable standard of living, according to members of the public.
This analysis:
• compares the living standards of different household types to MIS
in 2010 and 2022.
• breaks down the effect of different policies on household incomes
in 2022.
Introduction
How is public policy affecting
people’s ability to make ends meet?

Comparing living standards to the
Minimum Income Standard
Between 2010 and 2022, many family types are moving further away
from a decent living standard, even though minimum wages are going
up for people in work.

Note on assumptions: all workers are earning the National Minimum Wage for over 25s; families all have a 7-year-old
and a 4-year-old; families live in social housing and childless singles in low-cost private rented sector.
Shortfall in weekly income compared to the Minimum
Income Standard in 2010 and 2022 (all in 2017 prices)

Policy changes are having a
significant effect on living standards
The following graphs show how policies to raise pay, lower taxes
and reduce welfare affect working families in social housing,
receiving Universal Credit and starting a family after April 2017.
The graphs project the effect of past and current policies on net
weekly household incomes by the end of this Parliament (2022).
All figures are shown in 2017 prices.

We look at the combined effects of six policies
Positive impact
on living standards
Negative impact on
living standards
Raising Income
Tax allowances faster
than inflation,
since 2010.
Raising the minimum
wage for over-25s faster
than average earnings,
since 2010.
Reducing the
Universal Credit taper
from 65% to 63%
in 2017.
Uprating most
benefits more slowly
than inflation,
since 2010.
Abolishing the
first-child premium
in Universal Credit for
children born after
April 2017.
Reducing the
Universal Credit Work
Allowances in 2016, then
freezing them (compared
to increasing them with
average earnings).
+
-
-
-
-
+
+
+

Families with both parents working full-time earning the minimum wage
have benefited more from better pay and lower tax than they have lost
from benefit cuts…
Policy effects – in work
Dual earning couple, both earning NLW, 2 children
Effect on weekly disposable income
+ + ++ + +

… but the overall gain is smaller for a couple where one parent works
part-time and the other full-time…
Parents working full time + half time, both earning NLW, 2 children
*NB tax allowance gain includes Married Tax
Allowance, worth £1.85 a week to this family
+ + ++ +

… and there’s an overall loss for ‘single breadwinner’ couples,
because of smaller tax and wage gains.
Couple with one full-time worker on NLW, 2 children
*NB tax allowance gain includes Married Tax
Allowance, worth £1.85 a week to this family
+ + +

Lone parents working full-time are also losing out, because wage and tax
gains are offset by a larger cut to the Work Allowance than for couples…
Lone parent working full time, NLW, 2 children
+ + +

… and for a lone parent working part-time, the policy effects have been
overwhelmingly negative.
Lone parent working half time, NLW, 2 children
+ +

Policy effects - work patterns matter
For working families, things will have improved for those with two working
parents, with at least one working full-time. Only one in three working
families below a Minimum Income Standard is in this situation.
In-work support is particularly important for families with part-time or
irregular work, and for lone parents. Many of these families have caring
responsibilities.
The following two slides show the effect on out-of-work households.

Out-of-work individuals and families have seen only losses…
Policy effects – out of work
Out-of-work benefit losses - totals for different cases
Weekly
people’s ability to make ends meet? ** Includes loss of first child premium UC
* Includes effect of cash-limiting support
for private rents to 2020

… and some bigger cuts will add to the losses of some out-of-work families.
Policy effects – out of work
Out-of-work benefit losses - totals for different cases
Weekly
* Two-child limit applied to UC entitlement
if third child born after 2017

Conclusions
• Many low-income families are getting worse off relative to their
minimum needs. The main exceptions are dual earner parents without
high childcare costs and childless people who work full time.
• Present policies give selective help alongside continuing cuts.
The less work there is in the family, the more the cuts hurt and the
less the help offsets them.
• In 2022, out-of-work families will have to live on approximately
half of what they need.
• Ending the freeze so benefits keep pace with prices and allowing
families to keep more of what they earn would help people make
ends meet.

View the extended version of this presentation
also published:
Households below a Minimum Income Standard
2008/09 to 2015/16
Report by:
Matt Padley, Laura Valadez and Donald Hirsch.
www.jrf.org.uk/blog/budget-must-improve-living-standards-struggling-families

How is public policy affecting people’s ability to make ends meet?

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