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Child benefit and the fight against poverty

Child benefit and the fight against poverty

The PM’s confirmation this week that child benefit will be retained in its current form for the remainder of this Parliament is excellent news for parents. Child benefit makes a vital contribution to the extra costs of children, values children equally regardless of whether their parents are in or out of work (means testing for high earning parents notwithstanding), and is paid directly to mothers – for many, their only source of independent income. The very high take up of child benefit means it goes to those who need it, and all the evidence suggests that it is spent directly on children. In protecting child benefit, the government is doing right by children.

Unfortunately, the picture elsewhere is not quite so rosy. CPAG research has calculated that it costs £164 a week to cover the costs of the basics for children; child benefit (£20.70 for a first child, £13.70 for subsequent children) accounts for only a fraction of this, albeit a crucial one. And, while child benefit is being retained, it is nonetheless set to be frozen for two years. This is not insignificant: three years of freezes followed by two years of CPI uprating saw the benefit lose 14 per cent of its value over the course of the previous Parliament. That’s £238 for a family with two children.

The freeze in child benefit is part of a wider freeze on all working age benefits that it is estimated will save £1 billion a year; but this is dwarfed by the government’s stated intention to reduce the overall social security bill by £12 billion a year. Having vowed to protect pensioner benefits, and now child benefit, it is hard to see where that magnitude of savings – around 10 per cent of the working age benefits budget – will come from; but it is clear that all the realistic targets will hit children hard. Even the proposed reduction in the benefit cap, which will save only £0.1 billion, could push an extra 40,000 children into poverty.

We will get a sense of the likely impact when the next child poverty figures, covering 2013/14, are announced later this month, with the IFS projecting a rise of 300,000 (before housing costs) in just one year. The biggest driver behind that increase is changes to benefit uprating, which looms ominously large again in plans for social security, in the form of the proposal to freeze working age benefits.

These new figures are likely to confirm what many families know from their own experience – that we are in the midst of a child poverty crisis. There are set to be 700,000 more children in poverty by 2020 than a decade earlier, a figure that doesn’t take into account the impact of the proposed additional cuts to social security. The financial costs of this social failure are enormous, with child poverty already costing at least £29 billion a year.

Cutting social security is a choice. We know that benefit cuts under the coalition government were offset by tax cuts for the better off, making no contribution to deficit reduction. But there are other choices that could be made. The success in reducing pensioner poverty – so that pensioners have gone from the group most likely to the group least likely to be in poverty – shows that public policy can be a powerful tool. Just as those gains have been protected since 2010 through the triple lock on pensions, so a triple lock on children’s benefits could start to restore some of their lost value – and lock in any subsequent poverty-reducing increases.

In the long term, if we are finally to eradicate child poverty, we need to learn from past successes, but also to take on contemporary challenges. That will require a broad strategy – one that boosts employment and tackles low pay, provides high-quality childcare, reduces the education attainment gap, and addresses the housing crisis (with 1.4 million more children currently pushed into poverty as a result of housing costs). But, due to the increased costs that come with having children, combined with the reduced earning potential of parents, benefits must be part of the solution – spreading the costs of children over individuals’ life cycles, but also recognising that children are a social good, not a private luxury.

Child benefit is one of the strongest tools we have in reducing poverty, and it is vital that it is protected. But it can’t do the job on its own. We urgently need a comprehensive, action-focused strategy for reducing and then ending child poverty. The road ahead is long, and so we must start by protecting what we already have. Sadly, by targeting the benefit system that does so much to tackle poverty, the new government is already pointing us in the wrong direction.

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