Man holding hands with a childA couple with two children will be £1,250 a year worse off by 2015 as families "shoulder the burden of austerity", a report has warned.

The Institute for Fiscal Studies study, commissioned by the Family and Parenting Institute, said the shrunken income reflects benefit cuts for those of a working age and the greater reliance on benefits by people with children than those without.

Lone unemployed parents are set to be particularly badly hit, losing £2,000 of their annual income, representing a 12% drop, the study said. The report highlighted a "very real concern" as single parents face the challenge of finding a flexible job in a tough labour market as well as meeting childcare costs.

The report, titled The Impact of Austerity Measures on Households with Children, found that incomes among homes with children are set to fall in real terms by 4.2% between 2010-11 and 2015-16.

The annual reduction in income of £1,250 for a couple with two children is "significantly" steeper than the 0.9% drop felt across all households and the fall in income of £215 a year for couples with no children.

The report said that the introduction of Universal Credit will "soften the blow" for some families. But as it will only be brought in from October 2013 for new claimants and from April 2014 for existing claimants, the report said the Government should consider whether the right financial safeguards are in place to protect vulnerable groups in the meantime.

A Government spokesman said: "The Prime Minister acknowledged that families are facing difficult times so the Government has taken practical steps to help them - cutting fuel duty, freezing council tax and cutting income tax for millions. The Chancellor also confirmed working-age benefits will go up by 5.2% in April and increased the child element of the child tax credit in line with inflation.

"When introduced, universal credit will see nearly three million households with a higher level of entitlement than present and we believe, due to its simplicity, more families will be able to take up entitlements that are currently unclaimed. It will also help 80,000 more families with childcare support, which will enable more parents to take up work."

But shadow minister for women and equalities Yvette Cooper said the report left the Prime Minister's promise to be a family-friendly Government "in tatters". She added: "The Government is taking more from children than from the banks. Women and children are paying the highest price.

"David Cameron and his Cabinet are completely out of touch with the pressures on families across Britain. And it isn't even working - with £158 billion more borrowing than planned, as a result of their failed economic policies."
© 2012 Press Association