Are 342 children a day being pushed into poverty?
20th Mar 2013
Reactions to Wednesday's budget announcement varied across the board. Most newspapers shrugged, while some hailed the shelving of fuel duty and the decrease in the price of beer.
Save the Children struck a different chord.
Just hours after the Chancellor announced new initiatives, William Higham, Save the Children's Director of UK Policy sent out a press release denouncing the policy's lack of impact on child poverty:
"342 children a day — the equivalent of one primary school — will be pushed into poverty and the budget did little to address this growing crisis. For poor families aspiring to work their way out of poverty, the promise of an "aspiration nation" will ring hollow. None of the measures announced today target the poorest children. We know from our work helping children in the UK, just how much families — the majority of them in low paid employment - are struggling to make ends meet, cutting back on food, heating and warm clothes. In tough times, the government needed to prioritise the little funds it had on making work pay for those who need it most". [emphasis added]
The measure - 342 children a day - is based on a 2011 study published by the Institute of Fiscal Studies and commissioned by the Joseph Rowntree Foundation as well as a government revision of those estimates.
The Child Poverty Act classes an individual to be in relative poverty if their household's income is below 60% of the median income in that year; and is in absolute poverty if the household's real terms income is below 60% of the 2010/11 median income.
The fall in living standards for low-income families - caused in turn by a combination of high inflation and a real terms decline in pay - is largely below the growth in the number of poor.
According to the IFS, the impact of benefits uprating shouldn't be underestimated as "families in poverty get much of their income from state benefits and tax credits, which are typically increased in line with inflation." Starting from this year benefits will increase by 1% and will therefore rise below inflation.
Overall the IFS estimated that relative child poverty will rise from 20% (2011 level) to reach 24% in 2020/21, and that child poverty (against the fixed 2010/11 poverty line) will reach 23% in 2020/21. Both these figures are considerably higher than the targets - 10% and 5% respectively - outlined in the Child Poverty Act. According to their estimates the rate of relative child poverty forecast for 2020/21 would be the highest since 1999/2000.
When the report was published in October 2011, the IFS reported that it expected 800,000 children to be pushed into relative poverty between 2010 (2.5 million children) and 2020 (3.3 million children).
That's a rate of roughly 219 a day over ten years - some way less than estimates reported by Save the Children: 342 a day. What happened to the rest?
Here's where it gets tricky.
On January 15 this year, Chris Skidmore - Conservative MP for Kingswood -asked the Secretary of State for Work and Pensions if there were any estimates on the impact of Universal Credit and the Welfare Benefits Uprating Bill on child poverty.
He was told that the Government estimated that "the uprating measures in 2013-14, 2014-15 and 2015-16 will result in around an extra 200,000 children being deemed by this measure to be in relative income poverty compared to uprating benefits."
Save the Children took this to mean 200,000 children on top of those estimated by the Institute for Fiscal Studies, equivalent to a total of 1 million children ending up in poverty in the ten years between 2010/11 and 2020/11.
Is mixing together these two figures appropriate? After all, the IFS had already taken into consideration benefits uprating, though of course the estimates are by now over a year old.
To quote from the report:
"In our baseline scenario, relative poverty is forecast to continue to increase between 2015 and 2020, by 300,000 children and 1 million working-age adults. This increase is mainly due to benefit rates not keeping pace with growth in median income — CPI-uprating of benefits means that they go up by 1.5 percentage points less than the RPI over this period and 2.5 percentage points less each year than gross earnings in our baseline scenario."
Another point to make is that, since the report was published in 2011, the DWP's Housing Below Average Income report revealed that the actual number of children in poverty in 2010 was 2.3 million, not 2.5 million as the IFS had estimated.
Overall, all estimates seem to agree on one point: child poverty is on the rise by the hundreds of thousands. However there are potential problems with the figure cited by Save the Children. For one, the 1 million figure is spread out over ten years, not eight, so rather than 342 children being pushed into poverty every day, we're looking at 274 children a day since 2010. Of course this figure will also be affected by updates to the estimates.
We've asked the IFS to comment on Save the Children's interpretation of these figures.
"Since this projection was made, a number of things have happened that would change our projections. In particular, the government has made some changes to tax and benefit policy in Budget 2012, Autumn Statement 2012 and Budget 2013, and the macroeconomic forecasts that go into our model have changed. Save the Children are taking account of one change to benefit policy, namely the decision to increase most working-age benefits by just 1% in cash terms in each of the next three years, but not other tax and benefit changes or macroeconomic forecasts. I would therefore be very reluctant to simply add the two figures together to produce a revised forecast; nevertheless it is not an unreasonable thing for Save the Children to do, and their estimate of poverty in 2020 is actually broadly in line with our projection from the JRF report (of which they were presumably unaware)."
Flickr image courtesy of Kelly Short