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30 April 2015

How has the coalition done on child poverty?

The road to ending poverty is long – longer today, alas, than five years ago.

By Alison Garnham

When George Osborne claimed in last month’s Budget to have reduced child poverty, I’m sure mine weren’t the only raised eyebrows. Michael Gove made a similar claim yesterday, that the government has ‘been able to save £21bn in the welfare budget and at the same time reduce inequality and reduce child poverty in this country’. Important analysis published today by the New Policy Institute (NPI) hones in on the subtle flaw in this piece of political alchemy: it isn’t true.

Nor, however, is it strictly false – at least according to government figures. Unfortunately, official statistics are more than two years out of date. They let us down when trying to reach a judgement on this government’s record on child poverty because they only take us up to April 2013, missing out wave after wave of cuts to benefits and tax credits, as well as the introduction of the ‘benefit cap’ and ‘bedroom tax’. The NPI’s estimates step into this accountability gap, giving us the figures on which to base an assessment.

So what has happened to child poverty since 2010? Unfortunately, the news is bad. Four million children were in poverty in 2014/15, compared with 3.9 million in the last year of the previous government (but the rate is the same in each case, at 29%). The trend, however, is more worrying. Child poverty fell by 300,000 in the first year of the coalition government, for two main reasons: the fall happened due to policies in place prior to 2010, notably a continuation of benefit uprating; and – as ministers have acknowledged – falling median incomes in times of recession tend to reduce relative poverty. But from 2012/13 to 2014/15 – the years in which austerity has really started to bite – child poverty has risen by 400,000.

The analysis shows that it is children who have been hit hardest under the outgoing government. Not only do children remain the group most likely to be in poverty – twice as likely as pensioners – but the rise in the later years of this Parliament has been highest for children. The last two years show the tide turning on poverty – in the wrong direction, and to the detriment of children in particular.

And what is driving this increase? If we return to Gove’s £21 billion of ‘welfare’ cuts, we see a litany of reductions in vital support, and a chipping away at the safety net. One, apparently technical, set of changes stands out in particular – benefit uprating. At the end of last year, the Institute for Fiscal Studies (IFS) made their own child poverty projections, which chime with those of NPI. They estimate a rise of 700,000 overall by 2020, and single out uprating as the biggest factor behind the increases. Our own analysis shows that child benefit has lost 13.6% of its value over this Parliament compared with if it had been uprated by RPI – or £238 last year for a family with two children. The children’s element of child tax credit has lost 8.1% of its value compared with plans announced in the Emergency Budget of June 2010 – or £374 last year for a family with two children.

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Today’s figures tell us that there has been no miracle: cuts to support for families with children have driven the biggest rise in child poverty in a generation. The child poverty crisis (which costs at least £29 billion a year) deserves to become the defining issue of the next Parliament. The road to ending poverty is long – longer today, alas, than five years ago – and our programme for government sets out what is needed in the coming five years. But protecting child benefit and tax credits, perhaps through the same triple-lock that protects pensioners, represents a modest, vital first step for whoever takes power next month.