Tackling child poverty - progress report 2022 to 2023: annex d - cost of living focus report

Impacts on priority family types

Although the fundamental issue is the same for all low income households – incomes are not sufficient to meet inflated costs – the causes and impacts of the cost of living crisis affect each household differently. This is because a multitude of factors account for why a household may be experiencing poverty. For some households, there may be particular barriers to finding and entering work, while others may have additional, unavoidable, costs due to their household circumstances.

This section focuses on how the characteristics of each of the six priority household groups impact upon how they experience the cost of living crisis.

It is important to note that, although each priority household type is considered discretely, in reality these characteristics often intersect. For example, all six of the identified characteristics could be present in a single household. These intersections will affect people's experience of financial precarity and could compound levels of hardship. There are also contextual factors applicable to all household types that can exacerbate or alleviate financial stress, such as the strength of one's support network and the quality and availability of services.

While there are other household types and characteristics which are likely to make families vulnerable during the cost of living crisis (e.g. gender, rurality), this evidence review did not seek to explicitly cover equality characteristics (e.g. gender, religion, sexual orientation) nor did it seek to cover other attributes linked to lower income households (e.g. housing tenure, geographical location). This is more widely explored in a recent Scottish Government report on the cost of living crisis in Scotland.¹

Larger families (with three or more children)

This section highlights specific challenges that families with three or more children face during the ongoing cost of living crisis. Policies that alleviate these challenges are likely to minimise the risk of these families falling into poverty or deeper into poverty.

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Aggravated challenges

• Higher cost of essentials associated with larger households
• Benefit cap and flat rate cost of living payments mean larger families receive proportionally less financial support from UK Government
• Balancing paid work with childcare commitments and/or costs

This section highlights specific challenges that families with three or more children face during the ongoing cost of living crisis. Policies that alleviate these challenges are likely to minimise the risk of these families falling into poverty or deeper into poverty.

Unfavourable income from social security

Evidence suggests that the recent rise in child poverty in the UK (from 2012/2013) has been entirely driven by changes in the poverty rate for larger households, with barely any change for households in which there are fewer than three children.^126,[133] Changes to the UK benefits system are likely to explain the growth in poverty for larger families, with the benefit cap and the two child limit naturally having a greater impact on the incomes of larger families.^[134] While the Scottish Government mitigates the benefit cap through Discretionary Housing Payments,^[135] larger families are still negatively impacted by the two child limit.

Same rate of support despite higher costs

The UK government's Cost of Living Support provides one off, lump-sum payments to households where an individual is on a qualifying benefit. However, this means that larger households receive the same amount as households with fewer children, despite having higher expenses.^[136]

Limited options for increasing income from employment

The majority of children from larger families in poverty live in a household where someone works.⁹² However, it is more difficult in a larger family to offset the costs of childcare with income from work. If parents increase their working hours, it becomes necessary to arrange more childcare provision which, with three, or more children, represents a significant expense. Sometimes, the childcare expense outstrips the financial gains from additional hours or further employment.^[137]

Cost of living impact

Parents from larger families face greater barriers to working more hours, and have lost income through legacy austerity measures. They are more likely to be in debt or arrears as they struggle to keep up with the cost of living.^[138]

Research by JRF profiled the coping strategies employed by each of the priority family groups in response to the cost of living crisis. Larger families are the least likely to have sought employment, or additional work if already working, but nearly a quarter (22%) reported selling household items to boost household income.^[65]

Further, there is evidence that larger families are already struggling to maintain living standards during the ongoing crisis. A survey conducted by the Food Foundation in September 2022 reports that, across the UK, families with three or more children are much more likely to experience food insecurity (42%) than smaller families (25%).^[139] Indeed, the latest data for Scotland from the Family Resources Survey (FRS), covering 2021-2022, shows that both levels of food insecurity and food bank use are higher in households with three or more children than for smaller families.^{[140], [141]} However, it is worth noting that UK Trussell Trust figures show that, prior to the cost of living crisis, larger families were already overrepresented among people receiving food bank parcels in their network.^[142]

Lone parents

This section highlights specific challenges that lone parent families face during the ongoing cost of living crisis. Policies that alleviate these challenges are likely to minimise the risk of these families falling into poverty or deeper into poverty.

Graphic text below:

Aggravated challenges

• Limited ability to increase income through employment
• High household costs to income ratio
• Lack of financial buffer

This section highlights specific challenges that lone parent families face during the ongoing cost of living crisis. Policies that alleviate these challenges are likely to minimise the risk of these families falling into poverty or deeper into poverty.

Limited options for increasing income from employment

The majority of lone parents are in paid employment although, of the six priority family groups, lone parents are the least likely to be employed.^[92] The latest figures from the Office for National Statistics show that, in the UK, 69% of lone parents are in employment; with nearly half of these (48%) employed on a part-time basis.^[143]

Lone parents are less likely to be able to increase their household income during the cost of living crisis due to childcare responsibilities which can limit the amount and type of work undertaken. As the sole carer for a child, or children, lone parents can find it challenging to balance these responsibilities with paid work, especially where they do not have ready access to familial support.^[144]

Further, because the vast majority of lone parents are women, their earning potential is also affected by the gender pay gap which represents the undervaluation of work more typically done by women, such as domestic services, administration, early learning and childcare.^[145]

High household costs to income ratio

Household income is further limited by the fact that there is just one (potential) earner – whose income has to cover all household expenditure. Data from the Living Costs and Food Survey 2020-2021 highlights that lone parents spend over 50% of their household income on essentials, such as food, housing and clothing (compared to just over 40% for dual parent households).^[146] Additionally, JRF analysis conducted in January 2022 estimated lone parents would spend a quarter of their income on energy bills from April 2022.^[147]

Further, some evidence suggests that lone parents may be missing out on child maintenance payments from a non-custodial parent which would boost household income.^[148] Relatedly, there may be additional costs for parents who are separated such as paying for the travel necessary to maintain child contact.^[72]

Lack of financial buffer

A range of evidence indicates that lone-parent households are most vulnerable to the effects of the cost of living crisis and have suffered the worst impacts.^{[65],[68],[72]} For example, in research completed by JRF, seven in ten lone parent households (70%) reported having no, or low (<£250) savings and were more likely to report being in debt or arrears, meaning that they have very little protection against rising prices.^[65] Further, they are the most likely household type to report being unable to pay an unexpected bill of £200 (30%).^[65] Lone parents also more frequently reported cutting back on basics and essentials to try to save money.^[65]

Cost of living impact

Lone parent households were more likely than other priority groups to have applied for Universal Credit or for a crisis grant to help with the cost of living. Analysis from Action for Children's Crisis Fund shows that lone parents were disproportionately over-represented in applications.^[149] This suggests that lone parents, in particular, are running out of ways to economise and are turning to emergency support. For example, between 2021 and 2022, compared to all other household types, single parent households in the UK were significantly more likely to experience low or very low food security and were far more likely to have used a food bank in the same period.^[142] However, FRS data for Scotland suggests that low levels of food insecurity were more prevalent pre-pandemic, with 29% reporting low or very low food security in 2019/20, compared with 22% in 2021/22.¹⁴¹

Evidence also suggests that the cost of living crisis is particularly impacting upon the mental health of lone-parents. Research completed by One Parent Families Scotland in March-April 2022 reported that 86% of lone parents struggled with their mental health most or some of the time in the last year.^[68] Further, in research conducted by JRF, lone parents reported negative impacts on their social and personal lives as a result of the cost of living.^[65] Lone parents who cut back on social and leisure activities to save money are left particularly isolated, which has detrimental effects on mental health.^[72]

Minority ethnic households

This section highlights specific challenges that minority ethnic families face during the ongoing cost of living crisis. Policies that alleviate these challenges are likely to minimise the risk of these families falling into poverty or deeper into poverty.

It is important to note that 'minority ethnic' includes a diverse range of ethnic groups with a diverse range of experiences and outcomes. For example, employment rates vary considerably between different groups.

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Aggravated challenges

• Experience deeper levels of poverty compared to white population
• Comparatively higher rate of inwork poverty
• Face structural barriers due to minority status, including structural racism in the labor market

Deepening poverty relative to other groups

Although the relative poverty rate for minority ethnic households has remained relatively stable for the past 15 years, inequalities below the poverty line have been widening.^[150] This means minority ethnic people experience comparatively deeper levels of poverty than the white Scottish/British population. In 2022, the Runnymede Trust found that minority ethnic households are less likely to have savings and income at their disposal^[150] and are, therefore, more vulnerable to rises in the cost of living.

There is a high degree of correspondence between ethnicity and other factors associated with financial hardship and poverty. Minority ethnic households with children in Scotland are overrepresented in the private renting sector and spend a higher proportion of their income on housing costs than other families.^[92] The Scottish Government's 'Cost of Living (Tenant Protection) Act'^[97] offers some protection to private renters by capping rent increases, as well as placing a moratorium on enforced evictions.

Higher rate of in-work poverty

Of the priority groups, minority ethnic households with children have the highest rates of employment.^[151] In-work poverty is a particular issue for this group, who have to navigate structural racism in the labour market. Rates of hours and pay are comparatively worse for minority ethnic households who are overrepresented in jobs associated with lower socio-economic circumstances.^[152] This is particularly the case for Pakistani and Bangladeshi workers.^[153]

In order to mitigate against the effects of rising costs, minority ethnic households were significantly more likely than other priority groups to try and increase income through work – primarily seeking more hours or additional employment.^[65]

Structural Barriers

While there is a lack of evidence on levels of benefit take-up,^[92] there is research which indicates that language barriers and the stigma of claiming benefits can affect people from ethnic minority backgrounds accessing social security.^[154] For example, in many Arab and South Asian cultures, financial difficulties are perceived as a source of shame which may deter people from seeking state assistance.^[155] Similarly, while it is difficult to evidence empirically, it is probable that structural racism is an inhibitor of career progression for ethnic minorities.^[134],[156]

Cost of living impact

Minority ethnic families were one of the most likely family groups to have accessed foodbanks (13%, compared to 10% of low income families).^[65] Indeed, food insecurity is higher amongst Black and Minority Ethnic communities (11% compared to 6% for White communities). When the data is analysed to look at the food insecurity levels of children by ethnicity, there is still a prominent gap between minority ethnic and white communities (14% and 10%, respectively).^[150] Further, minority ethnic households were likely to be impacted by the cost of living in terms of the rising costs of speciality or culturally appropriate food.^{[71],[72],[134]}

It is difficult to gauge recent changes in food security levels for minority ethnic families within Scotland. The latest FRS data provides an aggregate of 4 years of data, due to small samples, so direct comparisons between before and after the onset of the cost of living crisis (late 2021) cannot be made.^[140],[141]

Additionally, research by the Royal Society for Public Health found people who identify as an ethnic minority are more likely to have reduced or cancelled leisure/recreational activities in an effort to reduce household spending (48%, compared to 28% for the general population).^[157]

Households with a disabled adult or child

This section highlights specific challenges that families with a disabled adult or child face during the ongoing cost of living crisis. Policies that alleviate these challenges are likely to minimise the risk of these families falling into poverty or deeper into poverty.

Graphic text below:

Aggravated challenges

• Higher living costs and any price increases will be acutely felt
• Already in a vulnerable position with limited options for increasing income from employment
• Gaps in provision with government support not meeting the additional costs arising from disability

This section highlights specific challenges that families with a disabled adult or child face during the ongoing cost of living crisis. Policies that alleviate these challenges are likely to minimise the risk of these families falling into poverty or deeper into poverty.

Higher ongoing living costs

Families with a disabled adult or child are likely to face higher living costs than those households where no one is disabled.^[158] Analysis by Scope reports that, in 2019-2020, on average, households with a disabled person required an additional £975 per month in order to have the same standard of living as non-disabled households.^[159]

In particular, the costs of energy and food, which have significantly contributed to recent inflation rises, may be greater for these households. For example, they may require additional heating, or need to run specialist equipment which uses more energy. Therefore, these households do not have an option to reduce these costs.^[160] Indeed, primary research with Marie Curie staff in 2022 found that 84% of patients had struggled to afford energy bills due to the cost of living crisis.^[161]

Some people, depending on the type of disability, can experience difficulty preparing food and so may rely on convenience food which is more expensive.^[158] Others can face additional expenses associated with condition-specific specialist diets.^[162] Levels of food security are therefore low compared to households with no disabled individual(s). Data do not yet portray the likely impact of the cost of living crisis on food security for disabled households.^[140],[141]

Additionally, of those surveyed by JRF, households with a disabled adult or child were the most likely group to report a negative effect on their mental health as a result of the cost of living crisis (74%) and, correspondingly, were most likely to have sought mental health support from the NHS (24%).^[65]

Limited options to increase income from paid work

In the UK, 79% of children who live in a household with a disabled person have at least one parent in work.^[92] However, the rate of employment for disabled people is significantly lower than for the general population ^[163] so, it is likely that the relatively high rate of employment in disabled households is accounted for by a non-disabled adult in work. The non-disabled adult is likely to have a wide range of unpaid caring responsibilities in the household, which can make changes to their working arrangements (such as, increasing hours or additional employment) difficult.^[164]

The Resolution Foundation note how, when disabled people are in work, they tend to work fewer hours and are less well paid on average.^[165] This will impact on a household's ability to manage financially during the current cost of living crisis. Further, in households where a child is disabled, it can be significantly more difficult to find childcare that adequately addresses that child's needs. For parents of disabled children, finding work that fits around childcare (whether from the parent, themselves, or from a formal provider) can be especially challenging.^134,[166]

Gaps in social security provision

The UK Government support package for disabled people (a one-off payment of £150)^[167] does not account for additional needs arising from different types of disability and therefore may not be sufficient to meet everyone's costs. For example, research by Scope found that 80% of disabled people receiving the £150 Disability Cost of Living Payment believed this would not be enough to cover the increased costs of essentials.^[168] Furthermore, the amount did not cover the deficit between the inflation rate and the value of benefits.^[169] Although benefits have now been uprated in line with September's CPI rate of inflation, this does not account for specific expenses such as food and energy, which disabled households are likely to spend more on and which have increased at a higher rate than the overall rate of inflation.^[170],[171]

To ease the financial burden on households with a disabled person, the Scottish Government has introduced specific benefits for carers. These include carer's allowance supplement which amounts to over £500 additional income per year for carers and a young carer grant worth over £300 a year for people aged 16-18 with caring responsibilities.^[172] In addition, Child Winter Heating Assistance (an annual payment of £235.70 for Winter 2023-2024) is paid automatically to households with a child on the highest rate care component of Child Disability Payment.^[173] Further, Social Security Scotland has taken a different approach to applying the eligibility criteria for Adult Disability Payment compared to Personal Independence Payments (PIP) administered by the DWP. Eligibility for PIP has been seen as increasingly conditional, leading to more claims being rejected for people who had previously qualified.^[162]

Households with a child under one year old

This section highlights specific challenges that families with a baby face during the ongoing cost of living crisis. Policies that alleviate these challenges are likely to minimise the risk of these families falling into poverty or deeper into poverty.

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Aggravated challenges

• Having a baby increases ongoing expenses for many families. This is on the back of reduced household income due to parental leave or reduced working hours
• Little room for reprioritising spend within the household. Increases recorded in the cost of baby essentials
• Affordable and available childcare options are highly limited for families with babies. Government support starts from the age of two for eligible families

This section highlights specific challenges that families with a baby face during the ongoing cost of living crisis. Policies that alleviate these challenges are likely to minimise the risk of these families falling into poverty or deeper into poverty.

Adjusting family finances

Having a new-born baby can be a catalyst for falling or moving deeper into poverty.^[174] Babies not only represent additional costs but can often mean a loss of income as parents take leave from employment often at a reduced rate of pay.^[114]

In the context of a cost of living crisis, parents will experience these new financial pressures to a greater extent as the cost of essentials increases. The 'First Steps Nutrition Trust' reports that, over a nine month period (August 2021 – May 2022), the cost of some infant formula increased by 14%.^[175] As a product used daily, increases to the price of infant formula can represent a significant proportion of a household's food budget. There are also reports that the price of nappies has increased at greater pace than the rate of inflation.^[176]

For some mothers, the choice over breastfeeding has been effectively removed as they cannot afford formula and must breastfeed out of necessity.^[72] This means that for many there will be an added pressure to breastfeed or spend already limited household resources on increasingly costly formula.

Childcare

Returning to work when a child is still a baby means having to organise suitable childcare arrangements which, if using a formal childcare provider, represents another significant cost. In Scotland, there is a strong Early Learning and Childcare offer. However, the allocation of government funded childcare hours is not available until a child is aged three years old, or two years old if a parent is on qualifying benefits.^[177] A parent on Universal Credit can claim to have part of their childcare paid for (85%).^[178] However, it then can become a challenge for parents to make sure the amount they work does not affect their benefit eligibility whilst still earning enough to cover costs, including their proportion of childcare.^[174]

Impacts for parental wellbeing

Facing financial difficulties when raising a baby or young child has been associated with stigma and feelings of inadequacy brought about by parents being unable to provide for children in the way they would like.^[179] The consequences of this are that parents economise on their own needs as they prioritise their children's wellbeing^[174] and/or end up getting into debt. A recent ONS survey reports that 30% of parents with dependent children under four years old reported using credit more than usual due to the increased costs of living – a greater proportion than any of the other characteristics reported on.⁷⁰

Mothers under 25 years old

This section highlights specific challenges that mothers aged 25 or under face during the ongoing cost of living crisis. Policies that alleviate these challenges are likely to minimise the risk of these families falling into poverty or deeper into poverty.

Graphic text below:

Aggravated challenges

• Limited options to increase income through employment
• Limited options for increasing income through social security. Some benefits are age related and younger people receive less
• Limited tools to absorb the recent increases in the cost of living

This section highlights specific challenges that mothers aged 25 or under face during the ongoing cost of living crisis. Policies that alleviate these challenges are likely to minimise the risk of these families falling into poverty or deeper into poverty.

Limited options for increasing income from employment

Women and young people are at higher risk of in-work poverty as they have a lower than average hourly rate of pay.^[92] For example, the National Living Wage is not enforced until the employee is at least 23 years old.^[180] In addition, the impact of the pandemic on employment has been particularly negative for this group. Evidence shows that young people were most affected by job losses, furlough and reduced hours and, since then, while pay for those under 18 years of age has recovered, pay levels for those aged 18 to 24 have increased more slowly.^[181] Further, this group are less likely to have savings.^[181] This, paired with low-paid employment, makes it harder for mothers under 25 years old to meet the costs of living.^[134]

Limited options for increasing income from social security

The rate of some social security benefits is lower for under 25s than for older age groups (for example, standard Universal Credit allowance and rates for Local Housing Allowance).^[182] Even when they qualify for benefits, young people can face barriers to accessing income from social security as they have less experience navigating complex social security systems.^[181] Additionally, the youngest mothers (those aged under 20 years of age) are more reliant on social security than older mothers. This makes them most at risk of any cuts or changes to eligibility criteria.^[92]

Confronting the cost of living crisis on less solid ground

Generally, mothers aged under 25 are more likely to have incomes that fluctuate. This is called 'income volatility' and it makes it hard to plan for recurrent sources of spending such as childcare, utilities, or housing.^[181] While there are no additional costs directly associated with a parent's age, there is some evidence from Scotland that younger mothers are less likely to access various advice or support services^[183] which could mean they are missing out on ways to maximise income. Because of their age, a younger mother's peer group are less likely to have children themselves and therefore informal sources of advice and support may also be limited.^[181]

Recent qualitative interviews with young mothers showed how they were already feeling the impact of price increases acutely prior to the cost of living crisis. The main areas of concern were gas and electricity, but also baby essentials such as food, infant formula and baby items. None of those interviewed had money left over at the end of each month, and a few participants explained that they had made adjustments in what they buy and use in order to cut back and help them cope financially.^[181] As the cost of living crisis continues, their situation is likely to worsen.