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Autumn Statement: the prospect for children’s benefits looks no brighter

Since 2012, we haven’t seen a solitary reference to child poverty in any budget or Autumn Statement, and poverty rates are rising.

Today’s the day that speculation about the content of the Autumn Statement reaches its peak. Will the Chancellor announce new spending cuts in light of lower-than-expected tax receipts? Or conversely, be in the market for some pre-election giveaways? Trails apart, we don’t yet know for sure what will be in the speech at 12.30pm tomorrow. But we have a pretty good idea what won’t.

The Autumn Statement is conventionally when the government announces how it will maintain the value of benefits for the following fiscal year. But in 2014, there’s little to say on the topic. Sheltered by the terms of the triple lock, the basic state pension will automatically be uprated by average earnings, prices or a nominal 2.5 per cent, whichever is higher. This year it is the last, which gives a happy uplift to the value of pensions over and above the cost of living. In stark contrast, the value of children’s benefits is locked down, this time by a decision at Autumn Statement 2012 to uprate them at a sub-inflation 1 per cent for the following three years.

Actually, it’s even worse than that. Child benefit has suffered over the course of this parliament not just from the 2012 decision to increase it slower than inflation, but also by a three-year freeze instituted when the coalition took power. The benefit has lost over 13 per cent of its real value as a result of uprating decisions taken since 2010. But those with good memories will recall that the government provided a reason for cutting this vital and popular benefit.

As the government said at the time, “We will freeze child benefit to help fund significant above indexation increases in the child tax credit . . . This means that support will be better targeted at low-income families with children and that this budget will have no measurable impact on child poverty”.

So how has that worked in practice? In 2011, low income families did do well when the children’s element of child tax credit (CTC) was increased in line with prices, and given a further healthy boost of £180 a year. Child poverty actually went down that year. By 2012, the commitment to help low-income families was weakened: CTC was increased by inflation, but the Chancellor then reneged on his promise of a further significant increase above prices. That year, child poverty rates stayed the same. But by 2013, any idea of protecting poorer children from austerity had left the Treasury and shut the door: CTC could languish with 1 per cent uprating for the following three years along with the rest of them. Surprise, surprise: child poverty rates are now on the rise.

Academics have long pointed out that the extent to which we protect the value of children’s benefits is intimately linked with the rate of child poverty. This was something the Chancellor acknowledged in 2010, but has remained tight-lipped about ever since. In fact, since 2012 we haven’t seen a solitary reference to child poverty in any budget or Autumn Statement, nor any analysis in Treasury documents as to the poverty effects of spending decisions.  This goes beyond being simply depressing. When the government has an enduring legal duty to take action to reduce child poverty to negligible levels by 2020, it begins to look more like an act of avoidance.

Whatever next May brings, the prospect for children’s benefits looks no brighter. The Conservatives plan to freeze all support to families for another two years if returned to power; a Labour government would uprate child benefit at only 1 per cent for the same time period; and the Lib Dems have intimated that uprating decisions will be taken on an ad hoc basis as finances allow. The stable and poverty-reducing settlement the triple lock provides pensioners may be an unimaginable dream for children in the foreseeable future.

Uprating may seem tedious, but in truth it matters a lot. When children’s benefits are properly uprated, families don’t drift away from the mainstream; if their value withers away, we cut our children loose. When the Chancellor steps up to the despatch box tomorrow, we will all listen hard to every word he has to say. But spare a thought, too, for the issue on which he stays silent.

Lindsay Judge is Senior Policy and Research officer at the Child Poverty Action Group

Lindsay Judge is senior policy and research officer for the Child Poverty Action Group.

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Why relations between Theresa May and Philip Hammond became tense so quickly

The political imperative of controlling immigration is clashing with the economic imperative of maintaining growth. 

There is no relationship in government more important than that between the prime minister and the chancellor. When Theresa May entered No.10, she chose Philip Hammond, a dependable technocrat and long-standing ally who she had known since Oxford University. 

But relations between the pair have proved far tenser than anticipated. On Wednesday, Hammond suggested that students could be excluded from the net migration target. "We are having conversations within government about the most appropriate way to record and address net migration," he told the Treasury select committee. The Chancellor, in common with many others, has long regarded the inclusion of students as an obstacle to growth. 

The following day Hammond was publicly rebuked by No.10. "Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included," a spokesman said (as I reported in advance, May believes that the public would see this move as "a fix"). 

This is not the only clash in May's first 100 days. Hammond was aggrieved by the Prime Minister's criticisms of loose monetary policy (which forced No.10 to state that it "respects the independence of the Bank of England") and is resisting tougher controls on foreign takeovers. The Chancellor has also struck a more sceptical tone on the UK's economic prospects. "It is clear to me that the British people did not vote on June 23 to become poorer," he declared in his conference speech, a signal that national prosperity must come before control of immigration. 

May and Hammond's relationship was never going to match the remarkable bond between David Cameron and George Osborne. But should relations worsen it risks becoming closer to that beween Gordon Brown and Alistair Darling. Like Hammond, Darling entered the Treasury as a calm technocrat and an ally of the PM. But the extraordinary circumstances of the financial crisis transformed him into a far more assertive figure.

In times of turmoil, there is an inevitable clash between political and economic priorities. As prime minister, Brown resisted talk of cuts for fear of the electoral consequences. But as chancellor, Darling was more concerned with the bottom line (backing a rise in VAT). By analogy, May is focused on the political imperative of controlling immigration, while Hammond is focused on the economic imperative of maintaining growth. If their relationship is to endure far tougher times they will soon need to find a middle way. 

George Eaton is political editor of the New Statesman.