20 August 2018

When it comes to tackling the cost of living crisis, less is more


Precariousness is the defining feature of low-income Britain.

According to a recent Resolution Foundation report, two-fifths of in-work low- to middle-income households say they cannot afford to save at least £10 a month.

Today, the publication of Child Poverty Action Group’s annual cost of a child calculations adds to this picture of hard-pressed Brits.

According to CPAG, a single parent earning the national living wage is £74-a-week short of the minimum income needed to raise a child. A couple on the national living wage and with two children is £59 off making ends meet.

Thanks to the introduction of a new 30-hour subsidy for childcare for three and four-year olds – a 2015 Tory manifesto promise – the CPAG calculate that the cost of a child from birth to 18th birthday has fallen modestly this year: “The overall cost of a child, including rent and childcare, fell from £155,00 to £150,800 for a couple and from £187,100 to £183,300 for a lone parent.”

But the figure is still too high.

Housing and childcare are – by some margin – the biggest costs low-income households face.

In both areas, Britain is at the wrong end of international affordability rankings. And, in both areas, you can point to obvious and important ways in which regulation is pushing up prices.

As has been pointed out repeatedly on CapX, Britain’s housing crisis is ultimately the product of a labyrinthine and restrictive planning system.

When it comes to childcare, the government has contradictory aims: insisting on high staff-to-child ratios and requiring more and more qualifications may sound like sensible policy, but it comes at a price. And the trade off hardly seems to be worth it. The cost of childcare in Britain is three times that of France and Germany. It seems unlikely that parents on the continent have accepted substantially more dangerous nurseries in exchange for lower prices.

It isn’t just the high cost of various essentials. The Taxpayers’ Alliance have found that the worst-off end up paying as much has half of their income in one form of tax or another.

The focus of CPAG is, inevitably, on the consequences of government belt-tightening. They point the finger at changes to the benefit system and the fact that child benefit and the child tax credit have not increased in cash terms since 2015, which, for some households, have offset the introduction of a living wage.

But, as I’ve argued for CapX before, tackling the cost of living crisis with further government intervention is treating the symptom not the cause. Wherever you stand on how much help the government should offer, lowering the cost of essentials everyone needs is surely hard to disagree with.

Upon her elevation to the job of Prime Minister, Theresa May pledged to deliver for British households struggling to get by – in other words, exactly the sort of households that the CPAG demonstrate cannot keep up with the costs of raising a family.

The goal was admirable. But, unless the Government address the underlying causes of Britain’s cost of living promise, that promise will go fulfilled.

Oliver Wiseman is Editor of CapX.