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What Is The Basic Standard Of Living?

by The Bankruptcy Service

Posted on July 21, 2015 at 11:00 AM

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It has been a tough time for millions of people in the UK over recent years, and there has been much talk about poverty lines, and many people and families struggling to get by, and this is often those that are in work, not just those without employment.

The Minimum Income Standard for the UK (MIS) is calculated according to what members of the public consider to be an acceptable standard of living in our society, and is a major body of work to be produced. It predicts how much money is required to buy a basket of goods that allows a person to live to a reasonable standard and participate in society. Thus it should not be used as a budgeting tool, as it does not address individual needs, but merely predicts a general level of subsistence.

The MIS is updated annually, at least with inflation, with new research every two years ensuring that it reflects changing social norms and provides an accurate picture of what income is required.

The impact of the minimum income standard has been widespread, and its influence significant. It is frequently used in policy debates and for analysis by charities and various public bodies alike. It serves as the basis for setting the living wage amount outside London, is endorsed by the Living Wage Foundation and adopted widely by numerous public and private bodies. It has even been used to analyse the costs of benefits, including universal credit, to calculate the cost of a child and work out the number living below the poverty line.

The effectiveness of the “standard” has spread further than the UK, with many other countries implementing or considering implementing a similar system in their country.

Using the MIS as a guide, the Living Wage outside London rose from £7.65 to £7.85 on 3 November 2014. This compares favourably to the minimum wage, a legal requirement for employers, which currently stands at £6.50 per hour for those 21 and over. Each year the living wage may well be uprated, once rises in living costs and any other changes in the economy have been taken into account. It will also look at the general wage pattern in the UK, to give an accurate and representative figure that is fair to both employee and employer.

The yearly updated MIS report produces budgets for 107 varieties of households, for all types of set-ups, from families with children, to those of working age and pensioners. In addition to the obvious factors such as inflation and change sin tax and benefit systems, every two years, new research considers whether the basket of items used to calculate the budgets needs revision in light of changes within UK society.

The Joseph Rowntree Foundation reports regularly on such matters. The foundation “works for social change in the UK by researching the root causes of social problems and developing solutions. Together with the Joseph Rowntree Housing Trust, we use our evidence and practical experience of developing housing and care services to influence policy, practice and public debate.”

In 2014, the foundation released their latest report, with the worrying news that the amount of money a typical family would need to maintain a basic but reasonable standard of living has risen five times quicker than wages since the recession took hold.
In addition to this, for the first time, internet access is now considered an essential for all groups, but a landline telephone is not, due to the rise of mobile phones.

The study, which is actually compiled for the Rowntree Foundation by the Centre for Research in Social Policy (CRSP), concluded that a single person without children would need £16,284 a year to be able to get by, up from £13,450 in 2008. In contrast to those figures, a couple with children would now have to earn £20,287 each – or £40,574 combined – in 2008, the figure stood at under £28,000. That is a rise of 46%, in a period when wages have risen on average by 9%.

Meanwhile pensioners are estimated to need £262.76 a week as of last year to meet a minimum standard of living, a rise of 30% from the 2008 figure.

The current government continues with its programme of cuts to benefits and credits, so those with a family may see the gap widen further, at least compared to those without children or pensioners. The gap between those with and without children has grown nine times in the last six years, and that trend looks set to continue. In 2008, as the recession began after the banking crisis, the difference between what was calculated for a single person without children to get by and a parent who was part of a couple was set at £450 a year. It now stands at over £4,000 a year.

In 2008 the difference between what a single person with no children and parent who was part of a couple would need to get by was only £450 a year. It now stands at £4,000.

Thus, the numbers are worrying as austerity continues to bite. Other government cuts have had a knock-on effect on calculations too. For example, the government’s cuts to rural bus services has now meant that a motor vehicle is a necessity for many away from cities for those with children. Added to the rise in cost of many basic supermarket items, with food prices thought to have risen by over 25% in recent years, the outlook is not good. Expect the MIS to rise in the years to come, as will the number who fall below it. Despite the chancellor George Osborne recently announcing a future rise in the re-modelled living wage, by taking away tax credits from many, there is little reason to think anything will change for the better anytime soon.

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