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Updates

• November 2008
• October 2008
• June 2008
• March 2008
• January 2008
• June 2007

November 2008

Eradicating child poverty: the role of key policy areas

Following on from its work in 2006, the JRF commissioned a series of short reports focusing on certain key policy areas relevant to the 2020 target of eradicating UK child poverty. Each report presents an overview of the importance of the area, progress over the last few years, the extent of its likely contribution to the overall goal and effective alternatives where necessary. ATD Fourth World has also facilitated the involvement of families experiencing poverty in this process and written a report exploring the perspective of these families in relation to the policy areas being discussed. A Round-up by Donald Hirsch draws on the reports to examine the impact of current policy and suggest what is needed to ensure the target is met.

The reports cover the following areas:

• Can work eradicate child poverty? (Dave Simmonds and Paul Bivand, Inclusion)
• Tackling child poverty when parents cannot work (Martin Evans and L. Williams, Oxford University)
• Addressing in-work poverty (Peter Kenway, New Policy Institute)
• Childcare and child poverty (Jane Waldfogel, Columbia University and Alison Garnham, Daycare Trust)
• Parental qualifications and child poverty in 2020 (Andy Dickerson and J. Lindley)
• Ending severe child poverty (Jason Strelitz, Save the Children)
• The effects of discrimination on families in the fight to end child poverty (Matt Davies, ATD Fourth World)

October 2008

Costs of child poverty

Child poverty not only has great human costs for the families and children affected, but also imposes a large cost on taxpayers and reduces the UK’s economic potential. New research estimates that child poverty costs £25 billion each year in costs to the Exchequer and reduced GDP.

This new area of work focuses on two elements of these costs: making broad estimates of the cost to public finances of extra services required as a result of child poverty, and calculating the cost to society and UK GDP of the lost earning potential of adults who have grown up in poverty. These estimates are discussed in terms of a wider consideration of the social costs of child poverty.

The three reports cover the following areas:

1. The GDP costs of the lost earning potential of adults who have grown up in poverty (Jo Blanden, Kirstine Hansen and Stephen Machin)
2. The public service costs of child poverty (Professor Glen Bramley and David Watkins, Heriot-Watt University)
3. The costs of child poverty for individuals and society: a literature review (Julia Griggs and Robert Walker, University of Oxford)

A Round-up by Donald Hirsch includes the findings from the three reports and estimates some of the tangible costs resulting from child poverty.

June 2008: progress since 2006

In 2006:

• The poverty figures showed that between 1998-99 and 2004-05, 21% of children had been taken out of poverty on the government’s preferred measure. The target for this period had been a reduction of 25%.
• In 2006 the Joseph Rowntree Foundation published projections, worked out by the Institute for Fiscal Studies (IFS), estimating that on present policies, by 2010 the reduction would still only be just under one quarter, rather than the target figure of one half.
• To get the second quarter of children out of poverty through extra benefits and tax credits, JRF/IFS estimated that the government would have to spend about £4.3 billion more than it was planning in 2010.

Since 2006, the government has responded to this shortfall by increasing the resources available. Successive budgets have increased by about £2 billion the amount allocated annually to transfer payments to families with children, over and above its previous uprating plans. This money was announced in Budget 2007, Pre-budget Report 2007 and Budget 2008. It involves:

• rises in the level of the child element of Child Tax Credit, which goes only to low income families with children, above the previously announced plan to raise this with earnings;
• smaller rises in Child Benefit for the first child, above the normal inflation uprating;
• a policy of disregarding child benefit as part of the income used to means-test housing benefit, which gives a big boost to the incomes of low-earning working families who claim housing benefit.

Overall, the government estimates that these measures will take about 500,000 children out of poverty. This represents about half of the million reduction in child poverty required between 2004/5 and 2010/11 required to reach the target. In fact, it is likely that child poverty will fall by somewhat less than 500,000 with these measures, since without them it may well have risen. The JRF estimate in 2006 assumed a very optimistic scenario for employment growth, especially among lone parents, which is unlikely to be met. Lone parent employment was then 56% and we assumed it would rise to 67% by 2010. So far it has only risen to 57%. With current policies, employment would need to rise just for the relative child poverty rate to stand still, because some taxes and benefits are not being increased in line with average incomes.

The IFS have estimated that another £2.8 billion is still needed from government to meet the target. The latest that this could be announced to affect the target year is autumn 2009 to take effect in the 2010 Budget.

Since the data published in 2006, the published level of child poverty has risen again, from 2.7 to 2.9 million. The latest figures cover 2006/7, ie two years after the 2004/5 figures used in JRF’s child poverty report. The latest rise means that a 1.2 million reduction needs to take place in an extremely short period of four years to meet the 2010 target.

Note that the “headline” reduction in child poverty since 1998/99, which was 700,000 in 2004/5, is now 600,000 – a fall only of 100,000 even though child poverty on rounded figures appeared to rise by 200,000. This difference is due to inaccuracies of rounding. The actual rise was closer to 100,000 than 200,000.

Following the publication of the latest poverty figures, Donald Hirsch, poverty adviser to JRF, commented:

“Disappointingly, after a six year period of falling, child poverty rose in the two years to April 2007, wiping out some of the previous gains. More recently, the government has taken some significant measures which should help turn the tide once again in a positive direction, and this does not yet show up in the figures. But the rise in child poverty makes it even tougher to meet the stated target of halving child poverty by 2010. The Treasury estimates that the £2 billion made available in the last two Budgets will take half a million children out of poverty. But to meet the target, a total of 1.2 million will need to benefit, and this requires even greater efforts in the next two Budgets.

“Joseph Rowntree Foundation research earlier this year showed that turning the tide decisively against child poverty is particularly difficult with our present system for uprating benefits and tax credits. Without ad hoc budget announcements giving them more money year by year, families on the lowest incomes will fall behind. A more automatic system of uprating incomes to keep pace with rising earnings would tackle child poverty in a more systematic manner.”

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March 2008: Budget 2008 update

For the second year running, the Budget has added around £1 billion to measures to reduce child poverty. Given the tightness of the financial climate, this shows real commitment towards the target of halving child poverty between 1998/99 and 2010/11, and will certainly help restore momentum in this direction.

In 2006, JRF said a further £4 billion compared to present policies would need to be spent by 2010 in order to meet the target (which entailed a further reduction of child poverty by about 1 million). The government estimates that spending half that amount will produce a reduction of half of that million. Time is running out however: the present measures apply to the financial year starting in 2009, and there will only be one further financial year to make up the difference. This means finding extra resources by next year's budget or, at the very latest, the pre-budget report later in 2009.

In fact, it is likely that with the present measures the child poverty rate will fall by somewhat less than 500,000. The JRF estimate in 2006 assumed a very optimistic scenario for employment growth, especially among lone parents, which is unlikely to be met. Lone parent employment was then 56% and we assumed it would rise to 67% by 2010. So far it has only risen to 57%. With current policies, employment would need to rise just for the relative child poverty rate to stand still, because some taxes and benefits are not being increased in line with average incomes.

JRF hopes to revisit the modelling later in the year, based on new poverty data for 2006/7, due out in early April in the Households Below Average Incomes (HBAI) report.

Meanwhile, the Government is looking in detail at how longer term policies can help meet the 2020 target, by improving employment opportunities, improving earnings of parents in work and helping create better development outcomes for the children in deprived families who will be tomorrow's parents. What it is not doing so far is making its longer-term intentions known about the level of financial support (benefits and tax credits), which will continue to play a crucial role. On 9 April 2008, JRF will be publishing a report on the long-term impact of our present system for uprating benefits, tax credits and tax thresholds.

The Government's new strategy can be found here: Ending child poverty: everybody's business (PDF, 1.4MB)

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January 2008

Following our 2006 report on ending child poverty, JRF continues to monitor progress in this field, giving brief updates as new poverty figures are published each year.

In 2008, we are developing our analysis with a series of essays aimed at producing a better account of "what it will take to end child poverty" and giving an idea of the magnitude of the task in more areas than have been included in modelling so far (which has focused mainly on adjustments to the tax and benefit system).

The themes of these essays will be:

• Tackling in-work poverty, by Peter Kenway of the New Policy Institute, considering the extent to which various policies could help workers to escape poverty and reliance on tax credits - e.g. wage rises for low-paid public sector workers; and reductions in income tax and council tax for this group.
• Improving childcare by Jane Waldfogel of the LSE/CASE and Alison Garnham of the Daycare Trust, looking at the contribution that further improvements in child care can make to meeting poverty targets.
• Ending severe and persistent poverty by Jason Strelitz of Save the Children, looking both at the role of benefits in securing a minimum income and at issues such as access to services, the extra costs faced by low income households and the role of family support.
• Children at greatest risk, by Gabrielle Preston from CPAG and John McKendrick from Glasgow University, reviewing policies to help groups including children of migrant workers and children in care whose situation may not be addressed by "mainstream" anti-poverty policies.
• Children in families unable to work by Martin Evans of the University of Bath, looking at factors preventing people from working and at how to respond to them, including improved maternity provision for low earners and better smoothing of income for short periods out of work.
• Equal opportunities and child poverty by David Darton, Commission for Equality and Human Rights, looking in particular at gender pay gaps and implications for mothers in low income families.
• Reducing unemployment and economic inactivity by Dave Simmonds, Centre for Economic and Social Inclusion, considering how policies to get more people into work can become a more effective tool for fighting child poverty.
• The contribution made by education and qualifications. What contribution to the reduction in child poverty could potentially be made by improved educational outcomes and thus an improved qualifications profile? JRF is currently considering ways in which evidence can be brought together to estimate this.

We will also be working with parents experiencing poverty. With the help of ATD Fourth World, a group of parents with a mixture of experiences and backgrounds will 'peer review' the initial proposals and the work as it proceeds.

Finally, an overview essay will bring these perspectives together and suggest which types of policy appear to be most promising in reducing child poverty. Which approaches provide greatest value for money and greatest certainty in terms of the poverty effect? What are the implications for a wide-ranging strategy to end child poverty?

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June 2007

Donald Hirsch, author of What will it take to end child poverty? Firing on all cylinders, has prepared the following updates:

• Where now on the long road to ending child poverty? (PDF, 18KB)
• 2007 poverty figures and Budget: FAQs (PDF, 17KB)

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