Soaring inflation and Universal Credit cut blamed for growing cost of raising a child

The cost of raising a kid will exceed £160,000 in 2021 — an increase of well over 3% – as millions struggle with inflation and the Universal Credit reduction, Child Poverty Action Group (CPAG) data suggests.

The cost of raising a kid up to the age of 18 reached £160,692 for couples and £193,801 for lone parents, representing a 3.6 percent and 3.3 percent increase over 2020, respectively, owing to inflation and increased childcare expenditures.

CPAG cautions that the cost of a kid is projected to climb quicker and outstrip rising general inflation in the months ahead, since prices for necessary products and services (such as electricity and food) are expected to rise faster than prices for other commodities.

And a 3.1 percent benefit increase will not occur until April 2021, when inflation is expected to be much higher at 5%.

The Cost of a Child 2021, published by Loughborough University for CPAG, demonstrates that the £20 weekly Universal Credit (UC) decrease has left non-working couple-families on UC with less than half (55 percent) of what they require to maintain a minimum acceptable quality of living. Each week, they are £216 short, compared to £186 last year, when the £20 increase was in effect.

Lone parents who are unable to work fare marginally better: they can cover 58 percent of their expenditures (leaving them £164 short), down from 64 percent last year (leaving them £136 short).

For non-working families that are subject to the Two-Child Limit and/or Benefit Cap, the income gap will be considerably higher.

While the Budget amendments to universal credit compensated families with a full-time worker for the UC cut, many working families – frequently due to the presence of very young children – sometimes faced a net loss, meaning they lost more from the £20 cut than they received from the Budget improvements.

For instance, a lone parent working half-time on the minimum wage received around £700 per year from the Budget, after losing £1,000 due to the UC decrease, a net loss of £300. As a result, these families will be able to cover far less of their bills now than they would be able to in 2020.

Since 2013/14, child poverty has increased at a faster rate for families with a youngest child under the age of five, increasing from 30% in 2013/14 to 36% in 2019/20.

Couples on UC who work full-time at the minimum wage just cover their expenditures with a net income of 106 percent of costs, whereas lone parents working the same hours and earning the same pay fall 11 percent (£43 per week) short.

Since 2012, the expense of raising a child has increased by 12.6% for a couple and 25% for a single parent.

To assist parents in providing a good quality of life for their children, CPAG is calling for a £10 rise in Child Benefit and the abolition of the Two-Child Limit and Benefit Cap.

Chief Executive of CPAG Alison Garnham said: “There is no let-up ahead for low-income families as the cost of bringing up a child climbs and the universal credit cut bites.

“Families who can’t work and those having to rely on part-time earnings – often because of very young kids – look especially precarious.

“Our research is based on what the public thinks families need for a decent, no-frills living standard. It finds that many are living below that minimum standard – and it’s moving further from their reach.

“The Government must act. It must stabilise family finances and protect children’s life chances by increasing child benefit by £10 per week.”

Author of ‘The Cost of a Child in 2021’ Professor Donald Hirsch, from Loughborough University, said: “After the blow to families on universal credit of losing £20 a week in October, rising prices this winter will bring new pressures.

“Since the government ended the benefits freeze last year, cost-of-living increases each April should help the poorest families to keep up with rising prices, but this is not always how things work out.

“With a return to rising food and energy prices, families whose costs are focused on covering basics like food and fuel face inflation rates higher than the general Consumer Prices Index on which benefit upratings are based.

“The pandemic demonstrated how vulnerable the worst-off families have become, with safety-net benefits at an all-time low relative to need.

“Only a decisive change of direction in benefits policy can avoid widespread suffering in the months and years ahead.”

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