A poverty of information: assessing the government’s new child poverty focus and future trends

Published on Public Finances and the Economy

Measures announced at the Summer Budget are expected to significantly increase the number of children (and households) living in poverty (households with less than 60 per cent of median income). Despite positive action on low pay, cuts to working age benefits mean that most of this increase is expected to be among those living in working households.

Yet there is a danger that this deterioration slips under the radar. The Welfare Reform and Employment Bill removes the requirement on Government to meet the 2020 child poverty target established in the Child Poverty Act 2010.The target involves cutting the proportion of children living in poverty to less than 10 per cent. The rate has fallen steadily since 1996-97 dropping from 27 per cent to a 2013-14 level of 17 per cent. This briefing considers the impact of the Summer Budget on poverty and the implications of government changing child poverty targets.

  • Taking into account the tax and benefit measures announced at the Summer Budget, as well as  the introduction of the national living wage, we estimate that a further 200,000 children (predominantly from working households) will fall into poverty in 2016.
  • In 2020 we estimate that at least an extra 300,000 children will be in this position, rising to 600,000 once all policy measures have taken effect (removal of both the family element and support for third children and beyond only affects the flow of new claimants (or additional births) rather than the existing stock). Two-thirds of this increase is among children in working households.
  • The Bill removes the current measure of income poverty from the suite of leading government metrics, introducing new ‘Life Chances’ measures of the number of children living in workless households and educational attainment for children by the age of 16. Too narrow a focus on incomes has drawbacks when assessing poverty, but removing any focus on incomes makes very little sense. The choice of replacement measures appears incomplete and the removal of an income measure is likely to obscure the potential degeneration in the poverty picture we expect over the rest of this decade.
  • This matters not just because some measures may capture poverty better than others, but because it has implications for government policy. The risk is that the government will do little to improve incomes for the working poor by focusing on worklessness. The problem of worklessness, particularly among families with children, has been diminishing over time; making further significant progress difficult and likely to require new approaches.