Today Yvette Cooper revived one of the most vital goals of the New Labour years: the eradication of child poverty. Let’s hope all the leadership candidates follow her lead. And more importantly, let’s hope each of them wills the means as well as the ends.
For while Ed Miliband’s Labour Party maintained its theoretical commitment to ending child poverty, it never developed a plausible strategy or timetable for achieving the goal. Indeed some in the party questioned whether an end to child poverty was achievable at all?
To answer that question, in February, a Fabian Society report set out a plausible and affordable roadmap for reaching the statutory child poverty target. We found that a huge amount can be achieved, even without significant new spending, but only if we have a stronger and fairer labour market; with the proceeds that generates then ploughed back to low and middle income families.
The backdrop is far from encouraging. Unless action is taken, an extra 1.2 million children will fall into poverty over the next 15 years, through a combination of widening earnings inequality and the effects of the tax and benefit system. And that’s before any further cuts from the Conservatives later this year. Nevertheless, with the right plan, child poverty can be turned around.
The first step to eradicating child poverty is to achieve very high levels of employment. The UK can match the highest levels of employment in the developed world today, by significantly improving support and opportunities for parents, carers, disabled people and people in their 60s. Alone this would not be enough to cut poverty, but it would stop it increasing by as much as we otherwise can expect.
And, just as importantly, it would generate significant resources for the exchequer – as would efforts to raise low pay, albeit on a smaller scale – through higher tax revenues and lower benefit payments. If this money is recycled to low and middle income households, the proceeds of a fairer labour market would have a much greater indirect effect on families than the original direct, market effects.
So for example, the proceeds generated for the government by raising the minimum wage and spreading take-up of the living wage would be sufficient to almost double the real value of child benefit by 2030, lifting 900,000 people out of poverty. And if the UK achieved an employment rate of around 80 per cent, the proceeds would come close to paying for benefits to be uprated by earnings not inflation, lifting 3.2 million people out of poverty.
So to have a plan for child poverty the Labour Party needs to be serious about a stronger labour market, but also find ways to recycle the proceeds back to families. The Fabian report proposed a ring-fenced Prosperity Fund, audited by the Office for Budget Responsibility, to ensure that every penny flowing to the government from structural improvements to the labour market would be ploughed back into the fight against poverty.
Its great news to see that the issue of poverty in childhood is returning to the heart of Labour’s debate. But debate is only the start. The Labour Party must sign-up to a workable plan to achieve Tony Blair’s famous goal of ending child poverty in a generation.
Recommendations from Inequality 2030: 10 steps to tackling child poverty over 15 years
- Recommit to the existing statutory child poverty targets, but extends the deadline for meeting them
- Adopt a (non-statutory) set of goals and measures for monitoring the pursuit of rising living standards
- Establish a National Prosperity Commission to advise on strategies for achieving these goals for sustainable prosperity
- Aim for at least 80 per cent of adults below pension age to be in work by 2030 and act to improve employment opportunities, support and incentives for mothers, disabled people and people in their 60s
- Raise the national minimum wage to 60 per cent of median earnings, ideally by 2020, with advice from the Low Pay Commission on implementation
- Legislate for all public sector jobs to pay the living wage; and forms a new partnership with business with the aim of halving the number of private sector jobs paid below the living wage
- Develop a radical cross-government strategy on pay and productivity, focusing on the middle of the labour market
- Reject major cuts to benefits that would reduce the living standards of low and middle income households, following the 2015 election
- Institute a ‘Prosperity Fund’ to redistribute to low and middle income households the proceeds arising each year from predistribution. The Office for Budget Responsibility and the proposed National Prosperity Commission should inform the fund’s work
- Consider using the resources earmarked to the Prosperity Fund to pay for: (1) more generous uprating of all benefits and tax credits; (2) significant real increases to child benefit
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