Tories push kids into poverty; Labour says "give up"

Submitted by martin on 13 May, 2013 - 10:26

Share prices are going up. Profits are increasing. Top bosses' pay is soaring. And child poverty is rising almost as fast.

According to a new report from the conservative Institute of Fiscal Studies (IFS): "Tax and benefit reforms introduced since April 2010 can account for almost all of the increase in child poverty projected over the next few years using the absolute low-income measure; using the relative low-income measure, child poverty would actually have fallen in the absence of reforms as a result of falls in median income".

Coalition government policies will continue to drive up child poverty until 2020-1 at least. But Labour's reaction? Jon Cruddas, the policy supremo appointed by Ed Miliband, has said: "the existing child poverty target needs rethinking". Nick Pearce, a wonk at the IPPR, a former Labour government adviser, and still influential in Labour circles, says flatly that "Labour must drop its child poverty target". He brightly proposes "freezing child benefit in cash terms for a decade" because the money could pay for more day-care.

IFS: "Relative child poverty is projected to increase by six percentage points between 2010–11 and 2020–21, reversing all of the reductions between 2000–01 and 2010–11. In 2020–21, child poverty is projected to be 23.5% and 27.2% using the relative and absolute low-income measures respectively... This translates to increases across the decade of 1.1 million in the number of children in poverty according to the relative low-income measure, and 1.4 million in the number of children in poverty according to the absolute low-income measure".

IFS predicts 3.4 million children in relative poverty in 2020-1, and 3.9 million in absolute poverty. The relative measure defines children as in poverty if their household has less than 60% of the median income of households of similar composition; the absolute measure, if less than a fixed figure, 60% of the median in 2010-1.

The absolute poverty figure is higher than the relative one because the IFS predicts median incomes (not top incomes, of course!) will be lower in 2020 than in 2010-11. Because the average person will be worse off, the defining line for relative poverty will fall.

The IFS's figures are not scaremongering worst-case scenarios. IFS has assumed both "relatively strong economic growth" after 2016-7 and that the coalition government's Universal Credit scheme works well and thus increases take-up of means-tested benefits above the rates in the present system where those benefits must be claimed piecemeal.

One element in the IFS figures may overstate child poverty: IFS uses predictions of the RPI measure of inflation to estimate values of money incomes, rather than of the lower CPI measure. The IFS authors point out that "it would not be sensible to simply use the CPI in place of the RPI to deflate incomes, as it excludes certain important housing costs", and so for their purposes there is no better index than RPI.

A factor driving increased poverty will be the new government policy of increasing benefits in line only with CPI, not RPI. In addition, some 200,000 children will be pushed into poverty by the additional cap of annual benefit rises at 1 per cent for three years from 2013.

The Child Poverty Act, which is supposed to bind future governments to cut child poverty to 10% (relative) and 5% (absolute), was passed only in March 2010. The Tories and the Lib Dems then supported it, and said they would keep its promises. But they have driven up child poverty ever since!

Measures of the Blair and Brown governments, especially tax credits, did decrease child poverty, though not as much they promised. Now that limited progress has been put into reverse.

Labour should drop not its opposition to child poverty but its unreasoning aversion to expropriating the banks and taxing the rich.

* Although entitled Child and Working-Age Poverty in Northern Ireland from 2010 to 2020, the IFS report contains the latest forecasts for Britain too.

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