A minimum income standard will help poorer families

We must ask how much people need to earn in order to achieve a minimum acceptable living standard

Wage packet
Working out how much people need to earn for a decent standard of living would be harder to manipulate, says Donald Hirsch. Photograph: Christopher Furlong/Getty Images

George Osborne claimed to have delivered a "progressive budget" in which "people at the bottom of the income scale will pay proportionately less than the top". The very fact that a Conservative chancellor is speaking in these terms is a sign of how far the Tories have come since the "trickle-down economics" of the 1980s, which simply assumed that if you helped wealth-makers, the poorest would eventually reap benefits. But how close to the truth was this claim, and what will determine whether Con-Lib rule will really turn out to be "progressive" in the longer term?

The answer to the first question is imprecise because the budget produced a range of gains and losses to people on low incomes. On the credit side, higher tax allowances help people in work, but not the poorest who do not pay tax. A rise in the child tax credit gives money to all low-income families with children, but on the debit side, some of this money will be taken back from the same people through child benefit reductions and more stringent means testing of tax credits for those in work. The VAT rise could hit people in work more than those on benefits, since benefits are pegged to inflation, and VAT price rises feed into that. Yet in the long term, the choice of a new (generally meaner) basis for counting inflation when uprating benefits and tax credits could seriously harm their recipients.

A different approach, based on the minimum income standard (MIS) published today by the Joseph Rowntree Foundation, produces results that are harder to manipulate. Rather than asking whether an imaginary individual is getting better or worse off, this asks how much people need to earn in order to get to a minimum acceptable living standard. It is based on in-depth research on what ordinary people consider to be essentials. It is not a measure of poverty but of decency, telling us how tough it is for people to reach a socially acceptable living standard.

To afford such a budget, a single person of working age needs to earn at least £14,400, and a couple with two young children £29,200 a year. But these amounts are heavily influenced by budget decisions, particularly for those with children, for whom making ends meet has become heavily dependent on tax credits. The budget could reduce the required earnings a single person needs by over £200 a year through higher tax allowances, but for the couple with children the gains are entirely cancelled out by reductions in tax credits and child benefit.

This is an early sign the government could start chipping away at the elaborate tax credit structure that helps families with poorly paying jobs to keep their heads above water. There is a good case for arguing that employers should take greater responsibility for paying decent wages, rather than leaving the government to pick up the tab. But pulling the rug at the very time when pay is least likely to rise will not achieve this. The government should work hard to produce a recovery in which the new jobs created are decent and sustainable, so people at the bottom of the labour market do not have to come to the state to provide most of their support. In the meantime, the chancellor should take care about withdrawing support from low- to middle-earning couples with children, who struggle to make ends meet: the very families who his party say they have been standing up for.

• Donald Hirsch is head of income studies, centre for research in social policy, Loughborough University and one of the authors of A Minimum Income Standard for the UK in 2010, published by the Joseph Rowntree Foundation jrf.org.uk.