Families need to earn 20pc more to maintain standard of living

The Joseph Rowntree Foundation estimates that parents with two children now need an income of £18,400 each because of rising prices and changes to child benefit and tax credits.

The report comes just weeks after the Office for National Statistics revealed real disposable incomes fell by 2.7 per cent in the year to March, the biggest fall for 34 years.

Donald Hirsch, from the Centre for Research in Social Policy at Loughborough University, who wrote the report, said: “This report shows that the squeeze in living standards caused by the combination of rising prices and stagnant incomes is hitting people on low incomes hard.

“This is partly because the prices of certain essentials like food have risen, but also because of policy decisions that have reduced what families have to live on.”

Mr Hirsch estimates that to meet the minimum income standard, families with two children and a single earner need gross earnings of £31,600, with two parents working the amount rises to £18,400 each – a total of £36,800, while a lone parent with one child would need to earn £18,200.

Higher bills for food and other essentials are also having a major impact, the reports says, with the cost of a “minimum” basket of goods and services up by 43 per cent over the past decade.

The minimum living standard is based on responses from members of the public who are asked to identify the items a household would need to reach a minimum acceptable standard of living, covering essential requirements and allowing people to participate in society. Mr Hirsch said the reduction in support for childcare has made many low-earning families worse off and substantially reduced their incentive to work.