Welfare isn’t working – child poverty

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.