From the TUC

The Budget and Child Poverty

24 Mar 2010, by in Society & Welfare

Despite the difficult economic circumstances, the Chancellor managed to find resources for increased support for unemployed people and children in poverty. Nicola has written about the extension of the Future Jobs Fund beyond 2011, which is one of the best parts of the Budget and there are other valuable advances on the poverty agenda.

The Budget also announced that the minimum wage is going to rise by 2.2% in October, to £5.93 an hour; there were pressures for the N.M.W. to be frozen.

There are useful changes to the Tax Credit system –

  • From April of next year people on Employment and Support Allowance who have a limited capability for work (this probably means anyone in the ‘support’ group) will automatically qualify for the disability element of Working Tax Credit.
  • From the same date, people aged over 60 will qualify for WTC if they work over 16 hours a week – at present they face a 30 hours threshold. This measure (which was announced in the PBR) should be particularly useful for people who want to remain in employment but would like to ‘down-shift’.
  • From next month, the WTC childcare element will be simplified for short claims. At present, these payments have to be spread out over the whole year, but the new system will pay parents the money when they are spending it. This will be particularly useful for parents with older children, who don’t need childcare during term time but do during the school holidays.
  • From 2012 the child element of the Child Tax Credit will be increased by £4 a week for children under 2.

In addition, a number of measures announced in previous Budgets and the Pre-Budget Report come into effect next month:

  • Extending free school meals to primary school children from low income working families;
  • Above inflation increases in tax credit rates;
  • The 100% disregard of child maintenance in means-tested benefits.

The last point is a big deal. At present the disregard is limited to £20 and this change will mean the all the maintenance paid by non-resident parents benefits the children; it is expected that it will lift 100,000 children out of poverty.

Just as important in its way is the publication of a Treasury-DCSF-DWP strategy for the next 10 years of policy on child poverty, Ending Child Poverty: mapping the route to 2020.

I have to say that I was reluctantly impressed. In the past I have argued

that – obviously – unions support the strategy of reducing poverty by getting as many people into jobs as possible, but that it is not enough. There are still going to be substantial numbers of children whose parents don’t get jobs and the only way to help them is by increasing the benefits their parents receive.

The new strategy document makes a good case for the substantial progress that could be made by increasing the employment rates for couple and lone parent families and by dealing with in-work poverty. There is also a discussion of the role that housing and neighbourhood disadvantage plays and of how interventions in health, education and childcare can stop childhood poverty leading on to an inter-generational cycle of poverty – and this discussion is much more convincing than in previous documents. I’ll return to these points at a later date.

At the heart of this strategy is a calculation of the number of children that could be taken out of poverty by the focus on employment:

A 75% employment rate for lone parents would take 450,000 children out of poverty.

Getting half of all low income unemployed or economically inactive couples in 1½ jobs: 200,000

Increasing the hours of first earners and the employment rate for second earners in couple families: 300,000

Improvements in skills and in-work progression could halve in-work poverty: 650,000

Fewer children born to teenage parents: 50,000

Improving take-up of existing tax credits and benefits: 250,000

Other changes: 200,000

Total: 2.1 million

This prompts a few thoughts. Firstly, taking 2.1 million children out of poverty would still leave nearly a million unreached. At this point, surely it would not be unreasonable to raise benefits to help them?

Secondly, some of these calculations are a bit hopeful: increasing take-up rates is more easily promised than achieved, for instance. And getting two-thirds of a million children out of poverty through “improved skills, skills utilisation and in-work progression” sounds a bit like “with one bound he was free.”

But, thirdly, getting three quarters of a million children out of poverty through employment sounds credible; together with realistic progress on the other items a goal of one million looks reasonable. This is the first time I’ve seen a large number attached to the employment-only strategy that I could believe in. I still think you have to accept that benefits and tax credits will have to be raised eventually, but this does look like a strategy that would allow for real progress on child poverty at a time when budgets are tight.

4 Responses to The Budget and Child Poverty

  1. Government investment is preventing soaring unemployment | Left Foot Forward
    Mar 24th 2010, 6:13 pm

    […] Today’s budget also includes a range of additional labour market measures, including some useful changes to the tax credit system – as my colleague Richard has outlined: […]

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    Mar 25th 2010, 7:55 am

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