NEW REPORT BY RESOLUTION FOUNDATION
The Government is due to publish a Child Poverty Strategy later this year, with a promise to bring about “an enduring reduction in child poverty” (write ALEX CLEGG and ADAM CORLETT of The Resolution Foundation).
In this report we focus on the Government’s headline metric of relative child poverty and look at what might be needed to achieve this welcome goal in the face of significant headwinds.
We consider the role of improvements in parental employment and housing affordability, but also of reforms to social security, and we show what is needed to make sure that any gains in this Parliament are not lost in future.
KEY FINDINGS
- On the Government’s headline measure of relative poverty after housing costs, 4.3 million children (three-in-ten) were living in relative poverty across the UK in 2022-23. On an international measure accounting for both housing and energy costs, the UK’s relative child poverty rate is higher than in any EU or EFTA nation bar Greece.
- On present policies and our baseline economic forecasts, we project that UK child poverty will rise over this Parliament from an estimated 31 per cent in 2024-25 to reach 33 per cent by 2029-30, its highest rate since 1998-99, and the highest number of children on record, at 4.6 million. This is partly because the outlook includes £3 billion of scheduled welfare cuts, in the form of the ongoing roll out of the two-child limit and family element abolition, and real cuts each year in the value of Local Housing Allowances and the benefit cap.
- It is right to be ambitious about employment rates and housing supply. Concerted action on these could lower child poverty by 130,000 compared to our base scenario, and would provide fiscal room for new spending (as would higher-than-expected growth more generally). But without changes to social security, poverty would still rise over the Parliament.
- The child poverty priority should be to abolish the two-child limit, and the benefit cap alongside it, which would take an estimated 500,000 children out of poverty in 2029-30. This would cost £4.5 billion in 2029-30 but is the most efficient anti-poverty measure the Government could take. Turning the two-child limit into a three-child limit (and assuming the benefit cap is still abolished) would have about two-thirds of the impact at two-thirds of the cost.
- Free School Meal entitlement should be extended to cover all families on Universal Credit, which would take around 100,000 children out of poverty, with money found from within existing departmental spending plans. For further poverty reductions, Local Housing Allowance should be repegged to local rents – rather than remain frozen indefinitely – and Universal Credit’s basic adequacy tackled, for example by reversing the abolition of the ‘family element’. This would reduce child poverty by a further 140,000. These policies could mean that, by 2029-30, child poverty could be around 900,000 lower than in our default projection, at 3.7 million: getting below 4 million for the first time since 2015 outside of 2020-21. And the child poverty rate could be cut to its lowest in four decades, at around 27 per cent, in the highest-ambition scenarios.
- The ambitious package would have a price tag of around £8.5 billion, falling to £5.5 billion if the extension of free school meals is funded within existing departmental budgets and the Government can succeed in raising employment and building more homes.
- In the longer-term, family benefit uprating needs to move to tracking average earnings – alongside the State Pension – or else relative child poverty will always tend to rise as social security entitlements fall behind average earnings.
Read Resolution Foundation’s TURNING THE TIDE report: