Child poverty: 2020 vision?

Past Trends

Child poverty levels fell sharply in the early years of the Labour Government, driven partly by substantial increases in government expenditure on tax credits, and growth in employment rates among lone parents.

Progress stalled somewhat after 2004/05, and resumed in 2009/10 and 2010/11 as benefit and tax credit income for households with children grew by more than median income.

Since then, weak economic growth and fiscal consolidation, including real-terms cuts to working-age social security benefits, have meant there has been little progress towards the target.

The most recent figures – for 2012/13 – show 2.3 million children in relative poverty and 2.6 million in absolute poverty.

Prospects

Projections by the Institute for Fiscal Studies (IFS) of relative and absolute child poverty – taking into account the latest economic forecasts, tax and benefit changes and population estimates – indicate that, under any plausible scenario, the 2020 targets will be missed. Indeed, the IFS expects relative poverty to rise, reaching more than twice its target rate by 2020/21.

Absolute poverty, meanwhile, is expected to rise to five times the 2020 target.

Chart: child poverty targets

The IFS expects that the child poverty targets will be missed by a wide margin. Children in poverty (before housing costs), UK, financial years 1998/99 to 2012/13; IFS projections to 2020/21.

Current circumstances give further grounds for pessimism about the likelihood of the 2020 targets being met.

First, the rapid fall in child poverty was only achieved by significant redistribution through the tax and benefit system. With all three main parties committed to further fiscal consolidation, the scope for further redistribution through this channel seems extremely limited.

Secondly, the increasing importance of working poverty means that policies aimed at getting households to "work more" will not, on their own, achieve the child poverty targets.

With nearly two-thirds of poor children in families with at least one adult in work, efforts must instead be focussed on the trickier business of raising wages for those at the bottom of the distribution.

But research for the Social Mobility and Child Poverty Commission (SMCPC) found that even under the most optimistic scenarios for parental employment and earnings, around one in five children would still be in relative and absolute poverty by 2020.

Options for the incoming Government

The incoming Government could reaffirm the commitment to the existing child poverty targets, but it seems inevitable they would be missed regardless of the policies pursued.

For this reason, the SMCPC accused the main parties in October 2014 of being unwilling to speak the "uncomfortable truth" about the prospects for child poverty, and urged the next Government to "come clean".

If the new Government were to accept that the existing targets are not going to be met, it could amend the Child Poverty Act to introduce new, more realistic targets.

Proposals by the previous Government for a "multidimensional" measure of poverty, capturing a broader range of factors such as worklessness, debt, addiction, housing quality and family environment, were not taken forward.

The SMCPC favours a third approach, namely, to supplement the existing targets with new measures to give a more "rounded" approach to poverty, and to amend the Child Poverty Act to set new timescales for achieving them.

It believes any Government serious about tackling child poverty needs to acknowledge the resources this would require, and commit to an ambitious programme to, among other things, recouple earnings to economic growth, prioritise children in fiscal policy, close gaps in educational attainment, improve labour market opportunities for young people, and tackle the UK's dysfunctional housing market.

Failure to meet the targets, or to amend them, could seriously undermine the administration's credibility. Some might also question the point of having a Child Poverty Act that wills ends when there is no political commitment to the means.

The 2020 child poverty targets

The Child Poverty Act received Royal Assent twelve days before the announcement of the 2010 General Election. The Act – which received cross-party support – sets out four legally-binding child poverty targets to be met by 2020:

• Relative poverty – less than 10% of children in families below 60% of median income* before housing costs
• Absolute poverty – less than 5% of children in families below 60% median income in 2010/11, adjusted for RPI inflation
• Combined low income and material deprivation – less than 5% of children in families below 70% median income and unable to afford key goods and services
• Persistent poverty – less than 7% of children in relative poverty for at least 3 out of the last 4 years

The Act also requires governments to publish child poverty strategies, and established a Child Poverty Commission to provide advice and monitor progress. As part of the Welfare Reform Act 2012, the previous Government expanded the Commission's remit to cover social mobility.

*The mid-point of the income distribution – half the population will be in households above median income, and half below it.

Party Lines

• Conservatives: work to eliminate child poverty and introduce better measures to drive change
• Labour: will keep child poverty targets and will ask the OBR to monitor and report on progress
• SNP: will vote to increase benefits at least in line with CPI inflation, to ensure that the incomes of the poorest do not fall further behind the cost of living