What’s the minimum you can survive on?


9:10 am - July 3rd 2008

by Don Paskini    


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What’s the minimum amount of money that someone living in Britain needs?

The new report from the Joseph Rowntree Foundation, “A Minimum Income Standard for Britain“, makes an interesting attempt to answer this question. They asked people from a range of different backgrounds, with advice from experts, to put together a list of ‘essentials’ of what they thought people would need in order to be able to participate in society.

They found that, after tax and excluding rent and childcare, a single adult would need a minimum of £158/week, a pensioner couple would need £201/week, a couple with 2 children would need £370/week and a lone parent with one child would need £210/week.

(It’s worth noting in passing, if these numbers seem a bit high, that the groups didn’t think that having a car was essential, this doesn’t include any costs if someone has a disability, and computer + internet was only essential for families with secondary school age children, as others could get their online needs met by going to the library).

What this means is that millions of people in Britain don’t have enough money to be able to buy the goods and services necessary to be able to lead a dignified life.

One of the most interesting findings of the research is how easy or difficult it is for different groups of people to reach this minimum. The state guarantees pensioners an income higher than that set in the minimum income standard (though not all take it up).

This is provided through Pension Credit, and the research found that universal services from free bus passes as well as the NHS also help considerably. Through most of history and up until about 5-10 years ago, older people were more likely to have to go without the essentials for a decent life than those younger than them, now this is no longer the case. Given the political will, it is not inevitable that people have to live on less than the minimum.

In contrast, benefits for out of work adults are less than half the essential minimum – worth remembering next time you hear someone going on about how benefit scroungers lead a life of luxury – and even a single adult working full time for less than £6.88/hour doesn’t earn enough to reach the minimum income standard.

Even the most hard-faced Thatcherite would have a tough time explaining why millions of their fellow citizens should go without the minimum needed, or which of the things on the list of essentials they think people should go without (Letters from a Tory – the comments box is all yours).

Above all, what this report helps us to do is to ask the right questions and assess policies against real priorities. For some reason, a lot of the political debate about welfare policy in the UK is about the things which bother well off, right wing Americans – how to reduce the bill to the taxpayer, how to reduce so-called ‘dependency’, what kinds of sanctions will make people change their behaviour.

There should instead be one, simple challenge – what mix of policies and services are needed to make sure that every single person is able to live a dignified life and participate fully in our society.

The report and supporting material is here.

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About the author
Don Paskini is deputy-editor of LC. He also blogs at donpaskini. He is on twitter as @donpaskini
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Reader comments


Interesting, I’ve just blogged about this too. Maybe a slightly different slant on it from your analysis but ultimately I think I have to agree with it when you say…

“what mix of policies and services are needed to make sure that every single person is able to live a dignified life and participate fully in our society.”

I’d be interested to know how many people are estimated to live below this basic standard and how it should be differentiated from the minimum standard.

If you want my honest opinion on what people should be able to live without, it’s a low tax allowance. Put up the personal tax allowance to £10,000, get rid of tax credits, and everyone will be better off and less reliant on the state. No-one, and I mean no-one, has ever explained to me the logic of the government taking out taxes and then claiming to ‘help us’ by giving us our money back through tax credits.

I would think that on a supposedly liberal website, someone out there might agree with this?

http://lettersfromatory.wordpress.com

LFaT – you must be falling into the old trap of confusing ‘liberal’ with ‘Labour’.

I am sure many of us have argued along the same lines LfaT, I personally don’t disagree with what you’re saying in theory, for one.

LfaT, uptake on tax credits is less than a third of people entitled to them because they are so Byzantine. Thus they fulfill the twin purposes of appearing to do something while not actually doing something, and jobs for the boys in navigating the Byzantine applications process for people.

I blogged on the subject of this report yesterday too. I fall deeply into the “not getting enough” group. And you know what? I’m doing OK.

What I found interesting about this report is that nobody thought that a car was essential to properly take part in society unless you live in a very rural area.

Which slightly undermines the car lobby, don’t you think?

Jo – It’s fairly obvious that you *can* walk or cycle if you’re not in a very rural area, I don’t think the car lobby will be losing any sleep myself :)

Will read the report in full before commenting in detail but I have to take issue with this Don:

“Even the most hard-faced Thatcherite would have a tough time explaining why millions of their fellow citizens should go without the minimum needed, or which of the things on the list of essentials they think people should go without”

I’m no ‘hard-faced Thatcherite’ Don (and I’m usually disinclined to jump to their defence) but the obvious needs stating here – an entirely valid Thatcherite response would be to question the best medium to long-term means of providing those things (i.e. promoting economic self-reliance rather than credits) or perhaps even questioning the definition of ‘minimum needs’ used by JRF (the notion of relative poverty is contentious but there are reasoned & mature refutations of the concept so let’s not pretend the JRF definitions are beyond scrutiny).

Of course many people here @ LC would dismiss those right-wing responses and that’s fine – the point is acknowledging they exist and according them some respect. The sentence from Don I highlighted is a neat (if underhand) attempt to frame the debate such that anyone who questions any aspect of the report or the data is somehow ‘denying basic needs’ – Karl Rove would be proud of you…

LFaT: Even Polly Toynbee is saying nowadays that the personal tax allowance should be raised. She still hasn’t accepted that tex credits are a bad idea, though.

LfaT:

Let’s clarify this – raising tax allowances alone won’t provide a minimum income standard, to get to that you have to have combine a higher allowance with a citizen’s basic income and effectively re-write the entire tax system. It’s not an overnight job but requires long-term structural changes that have to be carefully phased in so as not to fatally unbalance the whole public finance system.

You could get part of the way there by raising both tax allowances and the minimum wage to the level of the minimum income standard, but businesses would scream like hell about the increase in labour costs and many people would still fall through the net, particularly lone parents whose child care responsibilities preclude them working a full time job – which is where the ‘logic’ of the tax credits system comes from.

Unless you have a basic income scheme then some people, and almost always the most vulnerable, end up falling through the net, although, if you could set NMW and the main tax allowance to a level at which everyone in full time employment is guaranteed to meet the minimum income standard then you could limit the numbers claiming tax credits to top up their income to just those who only work part time.

Tax credits – in theory – offer another viable solution to the question of providing a minimum income standard, under the right conditions – and its there that the problems arise.

In an ideal world, they would operate as a front end mechanism for redistributing a portion of income tax revenues before those revenues are absorbed into the general public finance pot. In short, and to give a grossly simplified example, if I pay £200 a month in income tax and my next door neighbour earns £50 a month less than the minimum income standard then HMRC takes that £50 out of my PAYE contribution and give it to my neighbour as a tax credit and puts the rest in the general pot to pay for other stuff.

Now that would be extremely straightforward provided one key condition were met – that the income tax system operated in real time or near real time, i.e. on the day I get paid, so does HRMC, enabling them to cash flow a real time credits system.

Trouble is, it doesn’t work like that because although I get tax deducted when I get paid, my employer only turns that money over to HMRC on a quarterly basis and HRMC only actually know how much I’ve earned and paid in tax when my employer submits its P14 and P35 returns at the end of the financial year. As a result the PAYE system actually operates 12 months in arrears, which increases to 22 months for the self-employed, and its that that causes the tax credits system, as is, to be such a Byzantine exercise in bureaucracy.

Given a PAYE system that worked in real time, the tax credits system could be as straightforward as PAYE for the majority of people, with only the self-employed having to deal with all the messy business of notifications of changes in circumstances.

I don’t know how many people recall this, but in the early days the government did try to make tax credits work in something approximating real time with a system where, if you were entitled to tax credits, these would be added to your salary and paid by your employer, who would then reclaim the payments from HMRC. The problem with that was that claiming the money back was a complex and bureaucratic exercise – because of how the tax system operates – and in the case of small businesses, particularly those who employed a lot of part-time staff, the delay in reclaiming tax credit payments caused them serious cash flow problems.

If you look at where the bottlenecks are in all this then all roads lead to the tax system which is far too complex, bureaucratic and unresponsive to allow for a simple, workable, minimum income scheme.

So, linking in to a different debate, maybe one of the questions we should be asking is whether its sensible to spend £19 billion on a national identity system that at least half the population don’t want when that money could be more usefully invested in bringing our archaic tax system up to date and get it functioning in a manner that supports rather than hinders efforts to out in place a minimum income scheme.

Thanks to everyone for comments – I’ll reply properly later, but quickly:

thomas – about 1 in 5 live below the 60% of average income measure, the minimum income standard is higher for most groups, so very roughly about 13-14 million people.

LfAT/Jennie – if you scrap tax credits and raise personal allowances, it doesn’t make ‘everyone better off’, it absolutely hammers those with kids and many people working over 30 hours on low paid jobs. Take up of tax credits varies, child tax credit take up is far higher than 1 in 3. Agree mostly with what Unity has to say about tax credits and their problems, though IMO there are pretty significant problems with basic income schemes

Unity – agree with all of this

Jennie – interesting. Is your experience typical or non-typical of other people you know who earn similar amounts?

Liam – the JRF report is an absolute measure, not a relative one (it isn’t measuring poverty per se, but ability to participate in society and lead a dignified life). There are 2 separate debates, though:

1. Whether it should be ok for people to live below the minimum standard.
2. If not, which mix of policies is best to achieve this.

We can argue about which policies achieve number 2 (which can be anything from Thatcherite to social democratic to libertarian and so on), but I think it is going to be tougher for people to argue in favour of number 1.

Not sure you’ve got that right Don.

When I reference ‘relative poverty’ I’m not referring to the ‘60% of median’ debate – I acknowledge that the MIS measure is more subtle than that. But your assertion that “the JRF report is an absolute measure” is very misleading. It’s ‘absolute’ in the sense that the family budgets it uses are applied straight and not adjusted relative to any mean figures but by no stretch of the imagination could the measure itself be deemed a proxy for absolute poverty. They’re using a modified version of their own FBU budget standards that, among other things, includes provision for trips to the cinema, eating out, umbrellas and bicycles. At the same time it doesn’t include provision for tobacco or a car etc.

As with your post you’re again misrepresenting a Tory position by suggesting it would hold it “OK for people to live below the minimum standard” – it wouldn’t. It would question the veracity of the calculation behind that standard – a very different argument indeed.

@donpaskini: I don’t see how it “hammers” people working over 30 hours a week on low paid jobs – isn’t that exactly one of the main points of raising the personal tax allowance, that it is these people who will be taken out of tax?

When it comes to low-paid people with children, it’s rather more complicated I admit – but I still think there surely has to be a better way of helping these people out than the highly inefficient tax credits? I don’t think the optimal solution necessarily lies within the tax system.

Oh, and @don & @Liam: I think one of the biggest questions ‘Tories’ will ask is “does this include people who make no effort whatsoever to contribute to society themselves or to better themselves?”

Some random observations…

I’m surprised that Internet access isn’t included. To me, it’s an essential to (as the report says) “participate in society”. For example, I wouldn’t know about this report or be able to comment on it without net access. It isn’t expensive; my current computer cost be £1000 and I’ve had it 4 years (it only copst that much because it had a high spec — I could have got one much cheaper). If I keep it for another year, that’s £3.85 a week. Broadband is also cheap, particularly if you share it.

It includes both a landline and a mobile phone, with the mobile on PAYG. I don’t see any point in a landline unless you use it for ADSL, and if you have a mobile on contract your allowance of phone time should be enough (I never use anything near mine) unless you speand all day yacking on the phone (in which case you should use Skype).

I’m fairly certain my weekly expences work out less than the figure for a single person, yet I don’t consider myself badly off. Maybe I just don’t have particularly expensive tastes.

13 – I think I’ll wait for your detailed critique of the report, because the argument with the theoretical Thatcherite who wants to take issue with the findings isn’t going to be all that illuminating.

I think the JRF report’s methodology is pretty robust, though, because it is based on asking groups of ordinary people what they think, rather than being based on statistical calculations. Any attempts to unpick the calculations are at least as likely to show that they’ve understated the minimum income needed as that they’ve overstated it.

14 – lots of people get more in Child Tax Credit + Working Tax Credit then they pay in income tax.

there’s a difference between ‘there must be something better than tax credits’ (I’d broadly agree with that, as per Unity’s post) and ‘scrapping tax credits and putting up personal allowances would leave everyone better off’ (which is demonstrably untrue).

15 – here’s a response to that i prepared earlier: http://don-paskini.blogspot.com/2008/02/persistence-of-poverty.html

Basically, increasing people’s income to the minimum income standard is positively correlated with the likelihood that they will contribute to society and better themselves.

16 (and others) – worth remembering that the weekly amount includes a certain amount budgeted for one off big purchases. For instance, going to the dentist for a check up twice a year, replacing furniture every so often.

For people able to just about cover their day to day costs, then these kind of one off costs are often what push people into debt (to pay for a telly if it breaks) or go without (going to visit the dentist).

I agree with you more than you’d think, but even on the basis of these examples (a telly if it breaks?!) you must stop using the word ‘poverty’ if you want anyone outside your circle to take you seriously.

As for dentistry, if the NHS hadn’t f***ed up that area so comprehensively it wouldn’t be an issue!

In addition, if you’re considering ‘owning a television’ as necessary to take part in society (I wouldn’t, but I would consider internet access necessary), surely you’d be well served to campaign against the regressive license fee, which costs much more than a second hand TV does!

hmm, what does participation in society involve? Why is access to different information media considered prerequisite?

I think there is an important point here which needs disentangling, namely that there are different levels of society and that different people exist on those different levels to differing extents. So shouldn’t we first define what is a basic level of participation and what is considered the required minimum.

On a camping holiday I can survive on a lot less than I need to support my day-to-day routine during the rest of the year, but I couldn’t live under canvass the whole year round.

My impression is that thos of us who are more on the left are making more economic judgements, while the more liberal among us are making more political analysis – for us to find a way forward we need to know where they coincide.

19 – I haven’t been using the word ‘poverty’ to describe living below the minimum income standard, and agree that it wouldn’t be helpful. ‘Poverty’ means many different things to different people, and that’s why this idea that instead of talking about poverty in the UK we should instead start to discuss what people need to be able to participate fully might be more fruitful.

There’s a very interesting point coming out of this discussion that the list of necessities which the JRF focus groups came up with are different from those which we at LC would probably have. e.g., I don’t have a telly and don’t feel deprived by the lack of it, but would regard t’tinternet as an essential. This highlights different perceptions about what is and isn’t essential. There could be a very much more wide-ranging piece of research done which gets as many people as possible to join in the debate about what’s essential and what isn’t – I think there would be a lot of interest in this.

‘Poverty’ means many different things to different people, and that’s why this idea that instead of talking about poverty in the UK we should instead start to discuss what people need to be able to participate fully might be more fruitful.

That’s why I think “social exclusion” is a better term.

Comparing this with my own lifestyle and finances, I find this definition of “minimum” to be remarkably generous. I am somewhat above the minumum but I put away, approximately, that surplus into savings. With what I spend, I eat out frequently, club a little less frequently, and hang out in a pub 2 or 3 times a week. I suppose I don’t smoke much and I don’t drive but I’d say I am comfortably well off and I live in London where you would expect things not to stretch so far. More so, I would say that whether I am happy and participating socially bears little resemblance to how much I am spending (my favourite activities tend also to be the cheapest or free!). So I find it slightly perverse to see that many on the left seem to place so much emphasis on material resources, as if social participation could be classified by expenditure.

Having said that, I would be prepared to accept this concept of a social minimum so long as those on the left were prepared to agree to some economically literate methods to increase the spending power of those on lower incomes:

– Lower and simplify taxes for those on lower incomes (my taxes are my single biggest expenditure).
– De-regulate the housing market so that it can adapt to supply the demands on housing and keep house prices and rents low. Obviously a tough policy for anyone relying on middle class votes but necessary in order to prevent the development of a permanent property owning class that excludes others from the market.
– Reform the Common Agricultural Policy,remove tariff barriers on food and remove perverse subsides on bio-fuels, alcohol and tobacco production, so that the price of food falls. Of course, this would be difficult without either pulling out of or radically reforming the EU but this is what progressives should be aiming for.

I suppose that’s another question though, should the price of food fall?

If you want people on lower incomes to have more disposable income and, as a consequence, lifestyle choices and opportunity to participate socially, then yes. It strikes me as a bit of a no-brainer.

Unless you think, for example, that obesity is caused by poor people with too much spending power. In which case, besides being pretty absurd, that would undermine the whole idea of a minimum standard and you would actually want to keep people poor for the sake of their health, which I suppose would appeal to some arch-conservatives and a handful of communists:)

27. Hal Dixon

budget standards are not about poverty, they are the opposite of poverty, they are about adequacy.

are you poor if you are too poor to afford a helicopter? No

are you poor if you are too poor to afford a TV for every room in your house? No

are you poor if you are too poor to afford a TV at all? Yes

are you poor if you don’t want a TV? Maybe but only if you can’t afford it.

Nick: I think that people have spent too long believing food is the right price when it is too cheap in this country. I don’t believe farmers get a fair wage for what they do, and certainly on the subject of meat I think we’ve been getting it dirt cheap for too long, to the detriment of farming and to the environment.

I don’t believe people should have to choose between food and other things, but that is where benefits and/or a raising of the allowance comes in to play. Quite simply I find it strange that those that call themselves poor can still afford to eat meat such as chicken, but only because the treatment of said chicken is unethical and because profit margins are tight. There is no *right* for any particular person to be eating any specific kind of food yet we take it now as granted that we can eat meat 7 meals a week, sometimes more. It creates a counter-productive circle that ultimately will only end up harming us as consumers.

And no I’m not a vegetarian.

I missed out….

If we as a country want people to have the same chance of eating that chicken as those more well off then that’s cool, but it has to be done through better state subsidies for farmers, or benefits for the poor to pay for a more adequately and fairer priced meat.

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