Jack and Laura

Jack and Laura work 42 hours a week between them: Jack earns £28,000 a year and Laura earns £11,000. They have a young baby and a four year-old, both of whom are looked after by a registered childminder while Jack and Laura are at work. Their details are presented in Table 2.

• Wage and price trends mean that their combined earnings are set to fall by £1602 a year in 2011-12 in real terms, and by a further £182 in 2012-13.

• Tax and benefit changes will reduce the household income by an additional £2037 in 2011-12. There will be a slight improvement in 2012-13, but the household will still have lost £2,014 compared to 2010-11.

• Changes to income tax and National Insurance will act to support their finances, boosting household income by £764 in real terms in 2011-12 and by a further £264 in 2012-13

• The main hit to the household income will instead come from tax credit changes. The removal of the baby element of CTC (worth £545 in 2010-11), the reduced generosity of childcare support included in WTC (from 80 per cent of costs to 70 per cent) and the faster tapering of all tax credits (from 39 per cent to 41 per cent) result in a reduction of £2715 in 2011-12 in real terms.

• Their awards will subsequently fall by £347 in real terms in the following year, leaving the family £2,915 worse-off than in 2010-11. The freezing of Child Benefit produces a further loss.

Taking the wages, prices and tax and benefit changes together, Jack and Laura are set to be £3,639 (-8.5 per cent) poorer in 2011-12 than in 2010-11 in real terms. By 2012-13 the overall loss will be £3,799 (-9.3 per cent).

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