Making hundreds of thousands of families poorer, and then making some a little better off, does not count as a child poverty reduction plan, writes Nicola Smith.
Last week much was made of the impact that Universal Credit will supposedly have on poverty levels, with the Secretary of State for Work and Pensions, Iain Duncan Smith, claiming “350,000 children” will leave poverty as a result of the reform.
But all is not as it seems. The Department for Work and Pensions’ impact assessment for Universal Credit (UC) does state that, “on reasonable assumptions, the combined impact of take-up and entitlements” might lift around 350,000 children out of poverty.
However, crucially, the department are comparing “Universal Credit with the benefit and Tax Credit system projected forwards to 2014/15”.
In other words, DWP’s estimate compares the number of children who will be in poverty after the Budget and CSR’s welfare cuts (but before the introduction of UC) in 2014-15 with the number who will be in poverty after both the cuts and the adoption of Universal Credit.
It’s worth remembering the scale of the welfare cuts the government is proposing. Over the next few years significant reductions will be made in benefits paid to children and families.
These include:
• The three-year freeze in Child Benefit;
• The cuts in Housing Benefit (many of which will affect families with children);
• The removal of the Baby Element of Tax Credits;
• The abolition of the Health in Pregnancy Grant;
• The abolition of the Child Trust Fund;
• The cuts to the Sure Start Maternity Grant;
• The reversal of the proposed Toddler Tax Credit;
• Cuts to disability benefits; and
• The indexation of all benefits to CPI to name but a few.
The TUC has calculated that these cuts could leave a duel earner family on minimum wage worse off by more than £2,700 a year. Family Action has found that the poorest families with new babies will lose more than £1,700 annually. These are significant reductions in family incomes which will have real consequences for children’s lives and future prospects.
And it also turns out the Institute For Fiscal Studies undertaken research to estimate how many children will be affected.
In a study funded by the Joseph Rowntree Foundation they have estimated that between 2011-12 and 2013-14 government policy will lead to the number of children living in relative poverty increasing by 300,000 – with absolute poverty levels rising by half a million. These changes result from the benefit cuts the government has committed to introduce over the next three years.
IFS’s research does not forecast forward to 2014-15, but it seems fair to presume that, given their analysis shows 100,000 and 200,000 children a year respectively are moved into poverty as a result of the benefit reductions over each preceding years, as a minimum the government’s cuts will mean another 50,000 will be moved into poverty in 2014-15 (compared to the current, pre-June 2010 Budget, system).
In other words, between now and 2014-15, at least 350,000 children will move into relative poverty as a result of the coalition’s benefit cuts. Then, when Universal Credit comes along, 350,000 may be moved out (mainly as a result of increased benefit take up).
At best, this suggests that the net impact of welfare reform on child poverty will be zero, and at worst, if the benefits of UC fail to materialise or if the cuts in 2014-15 affect (as they may well do) more than 50,000 children, the net impact of welfare changes on child poverty over the next four years will be negative.
Given the scale of the impacts in absolute poverty that the IFS forecast, it also seems likely that whatever Universal Credit achieves the cuts to benefits for families in the UK prior to UC’s introduction will mean that absolute levels of child poverty are higher than at present.
This outcome is very far removed from the DWP’s recent spin – and calls into further question the government’s commitment to the abolition of child poverty. Making hundreds of thousands of families poorer, and then making some a little better off, does not count as a child poverty reduction plan.
Thanks to Chris Goulden for pointing me to the IFS research.
45 Responses to “Misleading to claim welfare reform will cut child poverty levels”
Romila Chaplin
RT @leftfootfwd: Misleading to claim welfare reform will cut child poverty levels: http://bit.ly/i56agX writes @NicolaTUC
Anon E Mouse
How on earth did our country ever get to the position where there are so different benefits available?
I know people on this blog agree with giving rich people Child Benefit so they can feel their socialist dream is intact but the the administration of all these different benefits costs a fortune, makes people dependant on the state and as as been shown after thirteen years of Labour governance does nothing to decrease the equality gap between rich and poor. Quite the reverse in fact.
What is more worrying is that Nicola Smith seems to want to continue to keep poor people poor which really shows Labour is far from the “Party of Aspiration” that it once was.
When it used to win elections…
Nicola Smith
Hi there Anon – as ever it’s a pleasure.
I can’t really see how you can have concluded I would rather people remained in poverty. In case you are really in any doubt I would far prefer that over the next few years the incomes of those already living in poverty were not cut. The point of the post is to draw people’s attention ot the fact that this is going to happen.
As to why there are so many benefits it’s because people’s lives are complex – Disability Living Allowance, for example, provides disabled people who incur additional costs as a result of their disability with particular help, while the Sure Start Maternity Grant provides new mothers living on very low incomes with a £500 grant to help meet the costs of having a new child. I am no advocate of complexity for complxity’s sake, and would far rather we had a more generous and a simpler system, but with a limited amount of money to go around complexity is often a concequence of sharing out the cash so that households incurring particular additional costs receive more.
And actually I haven’t mentioned the withdrawal of Child Benefit for higher earners in the post, the Child Benefit reference is to the freeze which will affect all families with children including those on the very lowest incomes. But if you want to know my views on universal benefits there are plenty other posts for you to choose from (and I believe several already have your comments attached to them).
Cheerio – Nic
Nicola Smith
Christopher,
Thanks for your comments. It’s a good point re: the number of benefits there are and actually the TUC is supportive of the principle of simplification and has welcomed the moves under Universal Credit to make the system easier to understand. However, at the same time we are opposed to using the introduction of UC as a cover for cutting people’s incomes.
Neither the DWP nor IFS have attempted to model behavioural impacts. My view on this is that there may be some changes but that they won’t be huge – most unemployed people already want a job the problem in the main is that there aren’t enough. And key parts of UC are not decided – for example if childcare support for working parents, pension deductions under auto-enrollement travel costs for getting to work and/or deductions of passported benefits (such as free school meals or free prescription costs) aren’t included in better off in work assessments they may end up being fairly meaningless. And for some people their barriers to work are far greater than financial incentives – years of worklessness, low confidence, no skills or formal education, limited English, significant childcare, lack of flexible jobs etc etc – these are complex barriers to overcome.
On your key point I fundamentally disagree – poverty is by definition about income and it is simply wrong to pretend it can be ended without state action to redistribute wealth. To start with some people can’t work – without income transfers from the state some disabled people with children and lone parents with young children and childcare responsibilities will simply stay poor. This is also the case for lots of unemployed parents – the problem for many families is a lack of jobs, not a lack of motivation. And lots of people who are in-work are poor because their wages don’t pay enough. So again, without employers or the state acting to increase their incomes they will remain in poverty. I am very much in favour of a sustainable solution to poverty – which means raising productivity in low-paying industries, investing heavily in skills and high quality labour market programmes, building union organisation, better enforcing employment rights and continuing to raise the minimum wage to name but a few parts of the solution – but state income transfers will also be an inevitable part of the answer.
Anon E Mouse
Hi Nicola – The system is overly complex – it must be or you would be unable to produce such a list of benefits – I go with keeping it simple.
In your reply to Christopher you make a typical mistake (in my opinion – never humble) in assuming there is a set pot of money to go around and therefore you assert that redistribution is the answer.
Your second premise is based on a flawed interpretation of wealth. The idea should surely be to increase the pot of wealth available and then the distribution isn’t important providing everyone pays their fair share and everyone has enough (comparatively) to live on.
It’s Peter Mandelson and his “comfortable” to see people getting “filthy rich” I agree with I’m afraid.
Anything else is simply the politics of envy but overall it’s a good article…
(I’m on holiday with a new computer so things are good…)