The Government has moved on course to meet its short-term target for reducing child poverty. New projections for the Joseph Rowntree Foundation suggest that around one million children will have been taken out of poverty by the spring of 2004 compared with 1997. But while the Government may just succeed in reaching its first milestone of reducing child poverty by a quarter by 2004, achieving its longer-term targets of halving poverty by 2010, and eradicating it ‘within a generation’, will be more difficult to achieve.
Researchers at the University of Cambridge and the London School of Economics find that relative poverty – measured as households with less than 60 per cent of the national mid-point income – fell by around one million between 1996/7 and 2000/1, including half a million children. This was largely due to increasing levels of employment and above-inflation increase in some benefits, especially those for families with children. Policy modelling - taking account of more recent tax and benefit changes including the introduction of child tax credits - shows that the Government’s policies would remove 1.3 million children from poverty by April 2004, other things being equal. However, the overall national increase in incomes since 1997 has served to raise the poverty threshold, with the result that the actual reduction in child poverty is likely to be around one million.
The researchers estimate that the number of children in poor households will be one third below its 1997 level by 2004 before housing costs are taken into account, and a quarter lower after housing costs are deducted. This means that the Government should meet its short-term target, unless other factors, such as employment, take a turn for the worse.
The study also anticipates a significant fall in poverty among pensioners between 1997 and 2003/4. However, the assessment of how many older people have been taken out of poverty depends heavily on which income measurement is used.
The incomes of many pensioner households are clustered close to the poverty line; while their housing costs tend to be significantly lower than those of working-age adults. This means that the numbers measured ‘below the poverty line’ are particularly sensitive to where the line is placed and whether housing costs are included in the calculation. Calculated after housing costs, more than 1.2 million pensioners will have been raised above the poverty line by policies that include the Minimum Income Guarantee. But when household incomes are measured before deducting housing costs the expected reduction in pensioner poverty is only 270,000.
A further analysis, looking at the impact of changes in duty on cigarettes, alcohol and petrol, and other indirect taxes, shows that poor families tend to be disproportionately affected. Even so, the overall reduction in poverty since 1997 would only be marginally lower if indirect taxation changes were reflected in official figures.
Holly Sutherland, Director of the Microsimulation Unit at Cambridge University and co-author of the report, said: “Reducing child poverty by a quarter would be a significant achievement, but our study also shows the challenge that the Government has set itself in tackling poverty. Rising employment – ‘work for those who can’ – has made a real contribution to reducing poverty in the past six years, but there are limits to how much further employment measures can be expected to reduce poverty.”
“Without the recent improvements made to the tax and benefit system for those with low incomes, poverty would be much worse. But it is also clear that more help will need to be directed towards poorer households if the Government is to reach its longer-term targets. Staying on track to halve child poverty by 2010 will be increasingly hard to achieve and require substantially more redistribution of national income towards the poorest families.”
