Research

Welfare isn't working – child poverty

Rt Hon Frank Field MP, Ben Cackett

In 1999, Tony Blair announced an historic mission to abolish child poverty within 20 years.

To achieve this aim, three targets were set:

to reduce child poverty by a quarter between 1998-99 and 2004-05;
to halve it by 2010-11; and
to eradicate it by 2020.

By 2009, the Government will be spending £13 billion a year extra, the equivalent of a 4p tax cut, on increased benefits and tax credits for families with children.

But, despite this huge expenditure, the Government missed the 2004-05 target and, in 2005-06, child poverty on the Government’s preferred measure actually increased.

On other measures the record looks weaker still:

there has been no change since 1997 in the numbers of children in severe poverty; and
one in five children living in households in poverty remain persistently poor.

The current anti-poverty strategy is biased:

the risk of poverty for children has hardly changed for children in two parent families;
despite the Government’s assertion that work is the best route out of poverty, half of all children in poverty remain in working households; and
there has been no reduction in the numbers of children in working poor households since 1995.

Tax credits are badly designed:

despite the huge costs, only a quarter of children in poor working households receiving tax credits are taken out of poverty because of them. Over 700,000 children in poor working households are not receiving tax credits;
a further result of the poor design of the tax credits system is that two parent households need far greater earnings than a lone parent to move past the poverty line. In 2004-05, two parents with two children had to earn £240 a week to have a net income of £295, to lift themselves above the poverty line. By contrast, a lone parent with the same number of children needed to earn just £76 a week to gain a net income of £230, £5 above the poverty line; and
with tax credits not making allowance for the second adult in the household, two parent families needed to work far longer to achieve the same level of income. In 2006, a lone parent with 2 children under 11, working 16 hours a week on the minimum wage, gained a total net income of £487 a week, largely due to tax credits. In order to attain the same weekly income, an equivalent two parent household needed to work 116 hours a week; an extraordinary 100 hours more than the single parent.

Even though the Government has shifted the goal posts for the 2010-11 target – re-defining 1 million children out of poverty – it is still expected to miss this target by a significant margin. Government policies have to register a fall in the number of poor children which is eight times the rate achieved over the last five years to meet the 2010-11 goal.

A new strategy is urgently needed which:

ceases discriminating against two parent working families;
as a result, ceases discriminating against single parents who re-partner and thereby encourages single parents to declare their existing partnerships;
increases incentives to work for potential second earners;
improves education outcomes at the bottom end to prevent intergenerational poverty; and
makes effective the child support system.