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”
Ness
One other element that will put children into poverty is the assumption in Universal Credit that self-employed people earn at least the minimum wage for the hours they do. Some don’t
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Rachael Chrisp
RT @leftfootfwd Misleading to claim welfare reform will cut child poverty levels: http://bit.ly/i56agX writes @NicolaTUC
Clare Fernyhough
The fact is that the Universal Credit is not a ‘do all’ as far as simplification. Benefits became tailored to peoples’ circumstances since we are all not old, young, single, with a family etc.
I think many people will be in for a real shock when they finally understand what the Universal Credit will replace. For example, it seems that it will only really be for those on a very basic income, providing a limited amount of subsidy to those on minimum wage. Whereas at the moment, a father on an income of £20,000 a year, might expect a considerable amount of money in subsidy. One family I know of gets around £10,000 in tax credits despite the breadwinner earning a reasonably good wage.
All of this is about to end I’m afraid. One might say that tax credits should never have been available to families who could have easily done without it; most just managed with a wage and child benefit payments. The problems is that these families now rely on tax credits because of the ever increasing costs of living, petrol etc. Some middle income families have only been able to afford a house because of tax credtis.
For poorer families the outlook is not good is perhaps more serious for single people and couples without children who are on minimum wage who have never had government support. These people face an unprecidented attack on their rights to at least have a roof above their heads. Whether you receive Housing Benefit, Local Housing Allowance or nothing at all, social rents are set to increase by up to 10% per year, by order of the government. Those in receipt of benefits will have to pay a chunk of that toward their rents from 2013, those not receiving benefits will find that their social housing rents will have risen so much that they will not afford to rent at all and will lose their secure tenancies (my rent was low because wages are low in my area, but will double to £120 per week within five years; one bedroom flats similarly since they cost as much to rent as my small semi). The LHA levels for my area do not reflect rental costs at all, and even if someone managed to secure such a property, year on year rising living costs or Housing Benefit cuts will soon mean that people will not afford to rent at all. So where will these hundreds of thousands, if not millions of people live? No one has yet been able to answer that question for me, so I will answer it below.
You only have to research the emergence of tent cities in America where the working poor and many professionals can no longer afford to rent to see what happens when a country removes such support via adequate wages and benefits. Of course, we do like to follow the USA in everything……
Helping the poor with one hand and taking away their only means of stability, social housing, with another is hardly a recipe for social mobility. This is just one of many cuts that will negate any attempt via the Universal Credit at alieving child poverty. Whilst changing and challenging peoples’ welfare dependency and their attitudes toward work is important, it is vital that the poor and vulnerable are given the income needed for housing and living costs. I am ashamed that our country is about to make sure that they get neither.
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