Why no party can afford to ignore the cost of living

Cost of living shoppingHas the penny dropped? David Cameron told The Spectator this week a Conservative majority would ‘go further’ on getting more people out of poverty. His intervention was timely: figures this week showed over half of all people in poverty – some 6.7 million – live in working households.

A sizeable portion of the electorate are suffering. The PM is right that securing the recovery is important, but the debate has moved to a ‘crisis’ in the cost of living. The numbers certainly back some of this talk up, with OBR figures showing that average earnings will continue to lag behind inflation for a while yet.

The trouble the government faces is that these trends predate their tenure. Incomes at the bottom started falling in 2004 and there have been particularly adverse longer-term trends in the costs of public transport and childcare, as well as housing. Last year, people in the bottom fifth of the income distribution spent on average 29% of their income on housing, twice as much as those on average incomes and three times the level of the richest fifth. Over the last decade, the cost of electricity, gas and other fuels rose by 140%; water charges by 69% and the cost of public transport rose by 87%.

These averages also hide a lot of detail about who is feeling the squeeze most. Research into what the public think is an acceptable living standard has demonstrated that costs at the bottom have been rising faster than average, while the value of most benefits are being cut in real terms. Increases in the personal tax allowance do make life a little more affordable for those earning enough, but this has been overshadowed by cuts to tax credits and the rising cost of essentials.

That makes it all the more risky to rely on growth alone to raise living standards for the poorest. It means taking a twin approach – anti-poverty strategies need to get to grips with both raising incomes and reducing costs. This doesn’t just mean improvements in benefit levels (important as that is in the longer-term), but measures on both wages and living costs. Councils, social landlords and businesses must have a role to play; announcements on payday lending, fuel, rail fares and energy prices demonstrate what government can do.

These measures help, but manifestos must go further. With 13 million people now living on a low income, raising their standard of living has to be a priority for specific and effective action. No party can afford to sit back and wait.

Chris Goulden is Head of Poverty at the Joseph Rowntree Foundation. He tweets at @chris_goulden

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