Poor families face being left Â£2,800 a year worse off by 2020 as living costs outstrip crucial welfare increases, charities have warned.
Prices are expected to have gone up by 35% over the course of the decade but child benefit will have risen by just 2%, according to End Child Poverty coalition research.
Struggling families also find it harder to make ends meet because they are being hit by a “poverty premium” that leaves them paying more for goods and services, its report found.
“Forecasts suggest that child poverty rates will rise significantly in coming years,” the report said.
“Low income families really are feeling the pinch – trapped between support being eroded by the cost of living rising much faster than benefit rates, and facing some of the highest prices on basic essentials as a result of a poverty premium on key goods and services.”
An typical unemployed single parent with two children received benefits of around Â£198 a week before housing in April 2010, according to the Feeling the Pinch report.
To keep up with increased living costs, the payments, such as child benefits, tax credits and Jobseeker’s Allowance, would need to reach around Â£267 a week by 2020 but are expected to only reach Â£214, it added.
The Â£53 a week loss amounts to a hit of nearly Â£2,756 a year.
End Child Poverty, which is made up of around 100 organisations including Barnardo’s, Oxfam and the TUC, also warned housing benefit reforms mean payments to cover rent costs bear “little relationship” to accommodation bills.
If rents continue to rise at similar rates as they have over recent years, families in an average two-bedroom home face a shortfall of Â£155 a month, it predicted.
The poorest families are hit by a poverty premium that means they are forced to pay more for the same items as those who are wealthier, the coalition said.
Its research found higher loan rates, the cost of renting white goods instead of buying outright, steeper insurance premiums, cheque cashing costs and less favourable energy bills could leave poor families paying Â£1,700 more.
The coalition called on the Government to stop the four-year freeze on children’s benefits and said it must increase housing support in line with local rents.
It also urged the Government to set up a commission to find ways to stop the poorest customers paying the highest prices for goods and services.
Sam Royston, chair of the End Child Poverty coalition, said: “Families living in poverty are trapped between frozen support, rising costs of living, and a hefty poverty premium which means that they pay the most for basic essentials.
“End Child Poverty members know all too well the impact this poverty trap has on children’s lives. Too often, families are facing impossible choices between feeding their children and heating their home.
“The Government needs to take action now, to lift the four-year freeze on children’s benefits, and to ensure that the highest prices for family essentials aren’t paid by those who can least afford them.”
A Government spokesman said: “Our welfare reforms are incentivising work and restoring fairness to the system. Tackling poverty and delivering real social reform is a priority, and we are helping people to keep more of what they earn, and supporting households with the cost of living.
“We are increasing the National Living Wage, have frozen fuel duty for seven years running and our increases to the personal allowance have reduced tax bills for some of the lowest earners by Â£1,000 a year.”
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