An investigation of child poverty in large families and how the tax-benefit system might reduce this.
The UK child poverty rate for large families is currently among the highest in the OECD. The Government is committed to abolishing child poverty by 2020.
Looking at families with 3/4 or more children, this report:
The work is based on analysis of national and international data and on international comparison of how the tax and benefit system affects model families.
The Government is committed to the abolition of child poverty by 2020. This study investigates the prevalence and characteristics of poor children in large families (three/four or more children) in the UK and how we compare with other countries. It also explores how the tax and benefit system has varied by family size over recent years and how this compares with other countries. It discusses how the tax and benefit system might be adapted in favour of large families so that the child poverty target might be achieved.
The abolition of child poverty is key to the Government's social policy strategy. In 1999, the Prime Minister's Toynbee Hall speech promised "to eradicate child poverty within a generation". Child poverty is associated with poor well-being during childhood and leads to poor outcomes in adulthood. For a child to be poor just because they live in a large family is a particular injustice. This is already recognised to some extent in the tax/benefit system, which varies payments for families with different numbers of children.
What is a large family? Where possible (using the available data) the study defines children in families with four or more children (4+-child families) (10 per cent of all children) as living in a large family. Otherwise a large family is defined as having three or more children (3+-child families) (incorporating 4+-child families, to make 30 per cent of all children). Over the last 60 years there has been a reduction in the proportion of families with three or more children. However, they still constitute a third of all children and have a much higher risk of poverty than those in smaller families.
50 per cent of children in 4+-child families are poor compared with only 23 per cent in one-child families. Children in 3+-child families constitute 42 per cent of all poor children, with children in 4+-child families making up 19 per cent of all poor children. However, child poverty in large families has been falling since 1998/9 (see Figure 1). This could be the result of improvements in the employment rates in large families but the researchers conclude that it is more likely to be due to the impact of Working Families Tax Credit and Child Tax Credit.
The study shows that children in large families are more likely to have a parent who:
All of these characteristics are also associated with a higher risk of child poverty. However, the research has shown that there is also a 'large family effect', independent of the other characteristics of the families. A child in a 3+-child family was between 50-180 per cent more likely than a child in a one-child family to be poor. A child in a 4+-child family was between 280-800 per cent more likely to be poor than a child in a one-child family - other things being equal.
UK policies are not particularly sensitive to the needs of large families:
The treatment of large families in the tax and benefit system has changed over time.
However, this does not mean that the 'implied equivalence scale' in the tax and benefit system is adequate or correct.
Comparative analyses - using one study including 15 European countries and another study with 23 European and non-European countries - show that, before benefits are taken into account, the UK has one of the highest poverty rates for children in large families compared with other countries. Only Spain, Portugal and Hungary have higher rates of child poverty in 3+-child families before benefits are taken into account.
When comparing the UK's tax and benefit system to that of other countries, it appears that the UK is middling in the generosity of the benefit package to large families. UK policy is fairly effective in reducing its child poverty rate for large families, reducing the UK child poverty rate in 3+-child families by the fourth highest amount in the countries studied. However, it is less successful in reducing its child poverty in 3+-child families than in one-child families. After benefits are taken into account, it still ends up with the tenth highest child poverty rate out of 23 countries.
Figure 2 shows how child benefit packages vary by the number of children in the family (for couples and keeping earnings constant). It illustrates how unusual the UK is in favouring the first child.
The Child Poverty Review in 2004 announced "a long-term aspiration to improve the financial support available to large families". Long-term implies that it will be achieved by gearing benefit rates towards larger families over a period of years. This study has simulated six possible policy changes in order to explore how the Government might achieve this, and at what cost.
The best outcome in terms of equity for large families is achieved by increasing Child Benefit to the same level per child and then increasing the benefit for the third and subsequent child by £20 per week. However, it would cost £3.39 billion. Lesser increases in Child Benefit for larger families achieve more modest reductions in the poverty rates but at lower costs.
Adjustments in Child Tax Credit to pay the same amount for each child cost less and achieve good results for large families. There are a number of potential cost-free solutions. However, in most cases, reductions in the child poverty rate of large families are paid for by losses for better-off families. Also, because lone parents tend to be small families they tend to suffer slight increases in child poverty rates.
This illustrates that policy-makers seeking to help large families face several trade-offs.
A further factor that might also be an important constraint on policy is the general public's views about what large families deserve and about whether increasing benefits encourages people to have large families. If greater benefits are paid for the third and subsequent child, smaller (and childless) families may object. There may also be arguments about the relative needs of families with different numbers of children and anxiety about policies encouraging 'irresponsible' parenthood. However, as things are now, the question is why are small families so privileged in the tax and benefit system?
The work is based on the secondary analysis of national and international data. The national data sets included the Family Resources Survey, The Millennium Cohort Study and the Family and Child Survey. The international data was drawn from the European Community Household Panel and the Luxembourg Income Study. The study also drew on national and international data on how the tax-benefit system affects model families.
The work was directed by Professor Jonathan Bradshaw, and involved Emese Mayhew, Naomi Finch and Dr Christine Skinner in the Social Policy Research Unit at the University of York and Professor Veli-Matti Ritakallio at the University of Turku, Finland. Professor Holly Sutherland at the University of Essex undertook policy simulations using POLIMOD.
At the same time as this work was being undertaken Richard Berthoud was commissioned to undertake a study of large families and poverty for the Department for Work and Pensions. His report is published at the same time, Berthoud, R. and Iacovou, M. (2006) Large families and poverty, London: Department for Work and Pensions.