It will come as little surprise that raising a child is expensive, and that in London it has the potential to be more expensive than other parts of the country. However, new research from Child Poverty Action Group on the extra costs of children in the capital has brought up some intriguing findings that are relevant for the whole country.
The first point of interest is how the minimum standard in London differed from the rest of the country. The minimum income standard research works with members of the public to reach consensus about the minimum that is needed to survive and participate in society, and then calculates the cost of this minimum. In London, unlike the rest of the UK, it was decided that a flat rather than a house was acceptable and while a car was essential for families outside of London, it wasn’t in London.
However, high London prices mean that childcare and housing drive large additional costs in London. Childcare can cost 50 per cent more in London than in a lower cost part of the country reducing the financial gains from working more hours for families. Parents can claim support for childcare costs through working tax credits or universal credit, but the limit on the maximum costs that will be covered has not been uprated in a decade, whereas London childcare costs have increased 41 per cent since 2010. These limits are not adequate to cover London’s high costs, creating the perverse situation where a parent moving from 32 to 33 hours work per week at minimum wage and paying average childcare costs for one child will lose £4 for every additional hour worked. Outside of London, the same family would gain £1.16 (under universal credit) for each additional hour worked.
In focus groups, parents talked about how they felt they had to work full time in order to meet London’s high costs. Yet, additional hours worked could in fact leave them worse off as increases in costs outstrip increases in income.
Both in and out of London, it was agreed that costs for families should be based on them being able to live in social housing. But if it is not possible for a family to get social housing, the extra costs kids bring in the private sector dwarf all the other additional costs of having kids. A couple with two children in inner London will need to find an extra £208 every week to cover housing costs in the private rented sector compared to the equivalent household outside of London. While the additional costs of housing for children in the social sector are more manageable, in London they are still double the costs in the rest of the country.
For working households, this means that more of their earnings will be eaten up in rent, and that they will continue to claim housing benefit higher up the income scale. While most workless households will have all their rent covered by housing benefit, changes to entitlements for those renting in the private sector and the Benefit Cap mean more and more households in London will face a shortfall, and freezes to entitlements mean that the problem is set to get worse. This means that the issue of whether or not a family can get a social tenancy is particularly pertinent in London.
London can also act as a canary in the coalmine for other parts of the country where costs are rapidly rising. We are seeing a city where it is becoming increasing difficult for low income families to achieve a decent standard of living, leaving them with the choice between making large sacrifices to their standard of living or leaving London altogether. Action is needed to address the mismatch between costs and incomes most urgently in London, but also across the country.
Megan Jarvie is London Campaign Coordinator at Child Poverty Action Group
