Does cash or services have the biggest impact on child poverty?

We need to invest more money in eradicating child poverty, not simply shift current expenditure around.

There is a view being expressed in influential circles that the money spent on cash benefits (and tax credits) as part of the Labour government's child poverty strategy was wasted and that now it is much better to invest in services. The dominant rhetoric of the coalition government (supported by the Field and Allen Reviews and, to some extent, by Alan Milburn) is that very little was achieved despite billions of pounds being spent between 2000 and 2010, and the child poverty targets were not met. The Child Poverty Strategy (pdf) argued: “This government is committed to eradicating child poverty but recognises that income measures and targets do not tell the full story about the causes and consequences of childhood disadvantage. The previous government’s focus on narrow income targets meant they poured resources into short-term fixes to the symptoms of poverty instead of focusing on the causes. We plan to tackle head-on the causes of poverty which underpin low achievement, aspiration and opportunity across generations”. The Field Review (pdf) actually argued that investments in services should be funded by cutting child and family benefits. The chancellor immediately responded by reneging on his commitment to uprate child tax credits above the rate of inflation and instead to invest in early years for some deprived two-year-olds. James Purnell has joined the chorus and wants to freeze child benefit for 10 years in order to fund child care. Nick Pearce of IPPR has also blogged on the subject .

We need to recognise that the reduction in poverty achieved by the Labour child poverty strategy was mainly achieved by substantially increased and highly redistributive spending on cash benefits – tax credits including childcare tax credits, child benefits and educational maintenance allowances. Child poverty fell by a million. Without this extra cash it would have increased by a million. This evidence is rehearsed in Ending child poverty by 2020: progress made and lessons learned (pdf). Of course the state of the labour market, the minimum wage, and welfare to work played a part. Also extra spending on health, education and childcare helped. But the heavy lifting was done by cash transfers. The UK had the largest reduction in child poverty of any country in the OECD between the mid 1990s and 2008 - see here (pdf).

The claim that spending on services is better than spending on cash benefits may be influenced by the OECD, which publishes rather old (2007) data on spending on families with children as a proportion of GDP and break it down into spending on cash benefits, services and tax benefits. It is certainly true that this data shows that the Nordic countries have high levels of spending on services and low child poverty rates. But this is an association, not a cause. These countries have an egalitarian income distribution, high levels of parental labour market participation, high wages and, yes, heavy investment in good quality childcare. They also start with comparatively low pre transfer child poverty rates. Spending on cash benefits fell in all the Nordic countries in the 2000s and their child poverty rates increased.

The association between spending on services and child poverty is shown in Figure 1. There is a fairly weak association – thanks mainly to the Nordic countries. However there is no association between the proportion of family spending spent on services and child poverty rates or gaps.

Figure 1: Child poverty rate by spending on family services as % GDP

There is a much stronger association between spending on cash benefits and tax breaks and child poverty rates than there is with spending on services (see Figure 2).

Figure 2: Child poverty rate by spending on family cash benefits and tax breaks as % GDP

In EU countries there is a stronger association between child poverty gaps than child poverty rates and spending on cash benefits and tax breaks.  There is an even stronger association between spending on cash benefits and tax breaks and the reduction in child poverty achieved by transfers. See Figure 3.

Figure 3: % reduction in child poverty by % GDP spent on cash benefits and tax breaks in EU countries

Actually, it is the level of total spending on families - cash benefits plus services plus tax breaks – that is most closely associated with child poverty. The lesson is that we need to invest in children in all sorts of different ways. Spending on childcare probably helps to increase maternal employment, enhances gender equality, and possibly also has beneficial child development outcomes. But it is probably not the best way to tackle child poverty and income inequalities. Indeed, recent analysis of EU SILC data suggests that the UK is one of the countries where childcare for children aged two or less reaches the rich better than the poor. It does not tackle the poverty of older children – except possibly in the long term. To end child poverty – and to make long term savings - we need to accept that we are going to invest more money in children; not simply shift current expenditure around. This is politically difficult – but in policy terms, and for anyone who cares about child wellbeing, necessary. To shift spending from cash benefits to services now is going to result in increased child poverty.

Jonathan Bradshaw is Professor of Social Policy at University of York and trustee of Child Poverty Action Group.

 

Ending child poverty could also mean long-term savings. Photograph: Getty Images
Photo: Getty Images
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Why are boundary changes bad for Labour?

New boundaries, a smaller House of Commons and the shift to individual electoral registration all tilt the electoral battlefield further towards the Conservatives. Why?

The government has confirmed it will push ahead with plans to reduce the House of Commons to 600 seats from 650.  Why is that such bad news for the Labour Party? 

The damage is twofold. The switch to individual electoral registration will hurt Labour more than its rivals. . Constituency boundaries in Britain are drawn on registered electors, not by population - the average seat has around 70,000 voters but a population of 90,000, although there are significant variations within that. On the whole, at present, Labour MPs tend to have seats with fewer voters than their Conservative counterparts. These changes were halted by the Liberal Democrats in the coalition years but are now back on course.

The new, 600-member constituencies will all but eliminate those variations on mainland Britain, although the Isle of Wight, and the Scottish island constituencies will remain special cases. The net effect will be to reduce the number of Labour seats - and to make the remaining seats more marginal. (Of the 50 seats that would have been eradicated had the 2013 review taken place, 35 were held by Labour, including deputy leader Tom Watson's seat of West Bromwich East.)

Why will Labour seats become more marginal? For the most part, as seats expand, they will take on increasing numbers of suburban and rural voters, who tend to vote Conservative. The city of Leicester is a good example: currently the city sends three Labour MPs to Westminster, each with large majorities. Under boundary changes, all three could become more marginal as they take on more wards from the surrounding county. Liz Kendall's Leicester West seat is likely to have a particularly large influx of Tory voters, turning the seat - a Labour stronghold since 1945 - into a marginal. 

The pattern is fairly consistent throughout the United Kingdom - Labour safe seats either vanishing or becoming marginal or even Tory seats. On Merseyside, three seats - Frank Field's Birkenhead, a Labour seat since 1950, and two marginal Labour held seats, Wirral South and Wirral West - will become two: a safe Labour seat, and a safe Conservative seat on the Wirral. Lillian Greenwood, the Shadow Transport Secretary, would see her Nottingham seat take more of the Nottinghamshire countryside, becoming a Conservative-held marginal. 

The traffic - at least in the 2013 review - was not entirely one-way. Jane Ellison, the Tory MP for Battersea, would find herself fighting a seat with a notional Labour majority of just under 3,000, as opposed to her current majority of close to 8,000. 

But the net effect of the boundary review and the shrinking of the size of the House of Commons would be to the advantage of the Conservatives. If the 2015 election had been held using the 2013 boundaries, the Tories would have a majority of 22 – and Labour would have just 216 seats against 232 now.

It may be, however, that Labour dodges a bullet – because while the boundary changes would have given the Conservatives a bigger majority, they would have significantly fewer MPs – down to 311 from 330, a loss of 19 members of Parliament. Although the whips are attempting to steady the nerves of backbenchers about the potential loss of their seats, that the number of Conservative MPs who face involuntary retirement due to boundary changes is bigger than the party’s parliamentary majority may force a U-Turn.

That said, Labour’s relatively weak electoral showing may calm jittery Tory MPs. Two months into Ed Miliband’s leadership, Labour averaged 39 per cent in the polls. They got 31 per cent of the vote in 2015. Two months into Tony Blair’s leadership, Labour were on 53 per cent of the vote. They got 43 per cent of the vote. A month and a half into Jeremy Corbyn’s leadership, Labour is on 31 per cent of the vote.  A Blair-style drop of ten points would see the Tories net 388 seats under the new boundaries, with Labour on 131. A smaller Miliband-style drop would give the Conservatives 364, and leave Labour with 153 MPs.  

On Labour’s current trajectory, Tory MPs who lose out due to boundary changes may feel comfortable in their chances of picking up a seat elsewhere. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog. He usually writes about politics.