How far has child poverty declined?

Government figures released today show that, in 2000/1, 3.9 million children were in poverty, a fall of 0.5 million since the last year of the Conservative government. These new figures include, for the first time, the effects of crucial reforms like the working families' tax credit. But the fall in child poverty seems to leave the Government short of its claims that its reforms had "lifted 1.2 million children out of relative income poverty".

IFS analysis published today shows how three factors explain this shortfall:

• Average incomes have grown since 1996/7, and this has raised the poverty line. If the Government had chosen a fixed poverty line, rather than one that increases each year with average incomes, the fall in child poverty would have been far bigger: around 1.3 million.
• Timing: benefits and tax credits for poorer families increased half-way through 2000/1, but the new official figures cover the whole year. IFS analysis shows child poverty in the last six months of 2000/1 was 150,000 lower than across the year as a whole, making the decline 0.6 million since 1996/7.
• Some low-income families do not actually receive their benefit entitlement, and so have not gained from the Government's main anti-poverty reforms.

All this has made it harder to reduce the official child poverty count, but employment growth amongst parents has eased the Government's task. Unless this continues, achieving further reductions could prove even harder.

Report author Alissa Goodman said: "the lesson for the future is that child poverty can be reduced, but this is likely to require that benefits for poor families increase rapidly - by more than earnings". IFS analysis suggests that halving child poverty could be achieved by a permanent increase in spending on support for children of around 1 per cent of GDP - a large amount, but less than the increase in the tax burden since 1996/7. But in the run-up to next week's Budget, the Government will need to consider the importance of this demand on its finances alongside other considerations, like public service spending and the level of taxation.

Ends

Notes to Editors

1. This press release refers to children as being in poverty if their household income (after deducting housing costs) is below 60% of the median. This is one of many possible definitions, but one often emphasised by the Government.
2. Official figures quoted are published by the Government today in Households Below Average Incomes, 2000/01. These figures are calculated by the Department for Work and Pensions, in conjunction with the IFS, using the Family Resources Survey.
3. In 1999 Tony Blair announced his desire to 'abolish child poverty within a generation' (Beveridge Speech, March 1999, Toynbee Hall). Since then, the Government has made tighter commitments - in particular, to reduce the child poverty rate by a quarter by 2004/5 (See DSS website). The new data monitors progress towards these goals.
4. The 2001 Budget claimed that "tax and benefit reforms announced in this Parliament [i.e. 1997-2001] will lift over 1.2 million children out of relative poverty".
5. Estimates of the likely future cost of further poverty reduction policies are made using TAXBEN, the IFS tax and benefit model run on Family Resources Survey data from 1999/2000.
6. IFS Commentary No. 87 The Government's Child Poverty Target: How much progress has been made?, by Mike Brewer, Tom Clark and Alissa Goodman is to be launched at a free conference at IFS on Thursday 11th April at 12 noon. Hard copies of the document can be ordered from IFS (020 7291 4800) for £25 (£10 to IFS members). Press copies are available from Emma Hyman on 020 7291 4850.