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19 March 2015

What was missing from the 2015 Budget? Anything to do with child poverty

This was a "see no poverty, hear no poverty" budget from a government in denial.

By Alison Garnham

The Chancellor made claim to a truly national recovery throughout his speech but this is a ‘See no poverty, Hear no poverty’ Budget which continues to leave children and the low paid behind. 

Three statements made by the Chancellor in in his Budget speech yesterday caught my eye.

First, “Child poverty is down”.

This is notable for a couple of reasons. It’s the first time the Chancellor has mentioned poverty in a Budget or Autumn Statement speech in over three years. For a Chancellor who vowed to ensure we were all ‘in it together’ in his first Budget that’s a surprising omission. However, more strikingly, anyone who’s been paying attention knows perfectly well the outlook for child poverty is pretty bleak.

The claim that child poverty is down is true only if you ignore the impact of the Chancellor’s own policies, especially his big benefit cuts. Official child poverty statistics for the years in which benefit levels and tax credits suffered large cuts and the benefit cap and ‘bedroom tax’ were introduced (since April 2013) will be published only after May’s general election. 

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The Institute for Fiscal Studies forecasts that the Chancellor’s tax and benefit decisions will lead to child poverty rising by 400,000 over this parliament and by 700,000 overall by 2020. In his first Budget, the Chancellor gave an assurance that that the policies he announced, overall, would not increase child poverty over the next two years. He’s unable to give a similar assurance for the impact of his policies over the course of this Parliament and beyond.

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Second, “It’s the oldest rule of economic policy. It’s the lowest paid who suffer most when the economy fails and it’s the lowest paid who benefit when you turn that economy around.”

Rules get broken. At the moment, I imagine few people in low paid jobs feel they they’re benefiting from the recovery. Parents, especially.  They know perfectly well that the cost of a child is outstripping headline inflation, average wages, the minimum wage and benefit levels. 

The low paid who were hit by cuts to tax credits in the tough economic times are finding, in better times, that in-work benefits are still being cut. Indeed, the Chancellor’s cuts to Universal Credit, most recently at the Autumn Statement, are leading many to question whether, after all the upheaval and cost, universal credit will be capable of delivering its policy objectives of improving work incentives and reducing poverty.

Third, “we will use the resources from the bank sales and the lower interest payments and the lower welfare bills to pay down the national debt.”

This week the head of the National Audit Office bemoaned Whitehall’s failure to think through the impact of cuts. Today’s statement is a good example of that kind of myopic policy-making. All the main political parties accept that one reason why we need to end child poverty is because it damages our economy, adding pressures to public spending and wasting economic potential. So, spending cuts that create poverty aren’t cuts that the Treasury can bank – we also need to look to the other side of the ledger and factor-in the cost of poverty. Independent analysis CPAG commissioned from Donald Hirsch of Loughborough University shows the current annual cost of child poverty to be £29bn a year. This will rise sharply if poverty rises as the IFS projects.

We’re expecting the biggest rise in child poverty in a generation – a child poverty crisis – so you’d expect an urgent response, yet none appears to be forthcoming. Two-thirds of poor children live with  working parents, yet spending billions on a further rise in the personal tax allowance does little to help them as most of it is taxed away as in-work benefits are reduced. The same money channelled through children’s benefits, tax credits and universal credit would do much more for the low paid.

This is the last Budget before the general election. We’re hoping that the first Budget of the next Government, whoever is in power, sees, hears and responds to the poverty facing millions of our children.