- Benefit reforms threaten 1 in 4 children with poverty
Last updated at 1:49 AM on 11th October 2011
The typical family is facing a 2,000 fall in its annual income, leading financial experts warn.
The Institute for Fiscal Studies predicts that household spending power will fall by 7 per cent in real terms between 2009-10 and 2012-13.
This would mean a typical couple with two children and a total income of 30,056 would be 2,080 worse off in 2013 in real terms than they were in 2010 because their income would fall to 27,976.
Money: The Institute for Fiscal Studies predicts that household spending power will fall by 7 per cent in real terms between 2009-10 and 2012-13
It would represent the greatest fall over three years since the mid-1970s.
The report says it will take until at least 2015 before typical households – which face a steeper drop than the poorest ones – recover to the levels of 2009.
The study, paid for by the Joseph Rowntree Foundation, also revealed that one in four children will be living below official poverty lines in 10 years' time. It says the Coalition's tax and benefit reforms will drive down real incomes, and the new Universal Credit will fail to make up for the losses of the poor.
The think-tank report was seized on by Labour and child charities as evidence that the Government intends to condemn hundreds of thousands of children to lives in poverty.
Nearly one in four children will be living below official poverty lines in 10 years time a think tank report has revealed
But ministers said the IFS had failed to take into account the impact of welfare reforms on persuading people on benefits to go back to work.
The report says the Universal Credit, due to be introduced from 2013, will reduce by 450,000 the number of children in 'relative poverty', covering families with incomes lower than 60 per cent of the national average.
Liam Byrne said the Government's decision to cut will condemn hundreds of thousands more children to grow up poor
But it adds that other changes to benefits, for example raising levels annually by a lower measure of inflation, will more than offset the impact of the new system. Report author James Browne called on ministers to say how they plan to meet legal targets to reduce numbers of children below the poverty line.
Labour's shadow work and pensions secretary, Liam Byrne, said: 'David Cameron promised us he would not increase child poverty. Now we have the truth.
'The Tory-led Government's decision to cut too far and too fast this year will condemn hundreds of thousands more children to grow up poor.
'All the progress our country has made in a decade fighting the scar of child poverty has been wiped out by the decisions of just one year.
'A generation of children will not thank Cameron.'
Bob Reitemeier of the Children's Society warned: 'Children in households where income has fallen are likely to be twice as unhappy as those in homes where income has risen.
'They are at greater risk of suffering from mental health issues and behavioural problems and may also be at risk of performing badly at school.
'If the Government does not take appropriate action, the UK is likely to be rooted firmly at the bottom end of international tables for children's wellbeing for the foreseeable future.'
However, a Department for Work and Pensions spokesman said: 'The IFS acknowledge that Universal Credit will substantially reduce child poverty.
'It will make work pay for the first time, tackling in-work poverty, and lift over one million people, including 450,000 children, out of poverty.'
The report comes as households feel the effects of poor pay rises or wage freezes, plus soaring bills, with their earnings failing to keep pace with inflation and low interest rates.
The rise in National Insurance and VAT and the fact that more workers are having their pay taxed at 40 per cent, rather than 20 per cent, are also hitting families.
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