Pep and Jose, in their 40s and 50s, respectively, are setting up home together in the North of England, along with Jose’s son, Alexis, aged 13.
Jose’s dad helps with childcare, allowing Jose to work part-time. With his salary and child benefit, Jose has an income of £13,000 a year after tax and other deductions. Pep works full-time, earning £25,090 a year after tax and other deductions. They have no other sources of income, and do not receive any tax credits or other benefits.
They expect their expenditure in the new shared home to be as follows
• Rent: £900 per month
• Council tax: £1250 a year
• Food and household items: £240 per week
• Water: £200 every six months
• Gas and electricity: £350 per quarter
• Broadband, TV and phones: £85 a month
• Transport: £350 a month
• Gym, leisure, meals out: £200 a month
• Standard annual season tickets for Pep and Jose for their local sporting team: £550 a year each
• Young person’s annual season ticket for Alexis for their local sporting team: £200 a year
• Holidays: £2700 a year
2.1
(a) Using the Household income equivalence calculator, calculate the annual equivalised net income of Jose’s household when he was living as a single parent with Alexis. (2 marks)
(b) Comment on whether Jose’s standard of living will change when he and Pep live together. (4 marks)
2.2 Draw up an average monthly cash flow statement for Jose and Pep’s joint household. (4 marks)
2.3 Pep and Jose are planning ahead to purchase a standard season ticket for Alexis at their local sporting team, as Alexis will be liable to pay the standard rate next year. Comment on the financial situation of the household reflected in 2.2 and how Jose and Pep might be able to pay for the rise in Alexis’s season ticket price. (5 marks)
(Total marks available for Question 2: 15 marks)
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