House of Commons - Work and Pensions

Select Committee on Work and Pensions Second Report

3 Background

20. The number of children in poverty has increased threefold in the last 25 years (see chart 1). Using the poverty measure of households below 60% of median equivalised incomes, the most recent Households Below Average Income (HBAI) statistics (2002-03) show that 3.6 million children (or 28% of children) were living in income poverty when measured after housing costs (AHC) and 2.6 million when measured before housing costs (BHC).[17] Internationally, the UK has a comparatively high child poverty rate. Figures from the European Community Household Panel Survey show that in 1998 the UK had the highest child poverty rate in the European Union, but by 2001 the UK ranked 11^th out of the 15 European Union nations on child poverty rates (see chart 2).Chart 1: Children in low-income households in Britain[18]

Chart 2: Child poverty in Europe

21. Specific groups of children are more at risk of poverty than others. For example, the HBAI statistics show that four in five (79%) children in households where no adult is working were in income poverty. 32% of children in a household with at least one working adult and 11% of children in households with all adults in work were also in poverty. More than half (52%) of children in lone parent households lived in income poverty compared with 21% of children in couple households. 48% of children in a family with four or more children were in poverty compared with a quarter (25%) of children in a one child family.

22. Children from minority ethnic households had varying rates of child poverty but were more likely than children in white households to be poor. 26% of white children lived in income poverty compared with 75% of Pakistani/Bangladeshi children, 53% of black non-Caribbean, 39% of black Caribbean children and 22% of Indian children. Evidence suggests that children from minority ethnic groups are making up an increasing proportion of the child population - currently 12% of children in England and Wales are from a minority ethnic group (compared with 8% of the total population) and this is expected to increase to 20% by 2010.[19]

23. The age of adults and children in a household also affects child poverty rates, with younger children and younger mothers being associated with child poverty. A third (32%) of children in families where the youngest child is aged under 5 years were in poverty, compared with 29% where the youngest child was aged 5 to 10 years, to 24% for the 11 to 15 age group and 20% for the 16 to 18 age group. Where the mother was aged under 25 years, 53% of children were in poverty, falling to 43% for children whose mothers were aged 25 to 29, to 33% for the 30 to 34 age group and steadily decreasing until the 40-44 age group where it slowly rises again.

24. The presence of disability in a household also raises the likelihood of children being in poverty - 39% of children in households which include a disabled adult were in poverty, compared with 26% of those with no disabled adult; 31% of children in households with at least one disabled child were in poverty, compared with 28% of children in households with no disabled children; and, in households with at least one disabled adult and one or more disabled children, 40% of children were in poverty.

25. Child poverty varies substantially across different geographical areas of the UK too. At a country level, the HBAI statistics show that child poverty in Wales was slightly higher (30% compared with 29% in England and 27% in both Scotland and Northern Ireland). Using a different poverty measure[20] recent research on poverty in Northern Ireland found that the child poverty rate in Northern Ireland was 37% compared with 30% in Great Britain.[21] At a regional level, London had the highest child poverty rate in Britain (38% for Greater London - rising to 54% in inner London). Other regions in Britain with child poverty rates above the national average of 28% are the North East (37%), Yorkshire and the Humber and North West and Merseyside (both at 30%) and the West Midlands (29%). The lowest child poverty rates were in the South East with a child poverty rate of 20%.

The child poverty targets

26. In addition to the long-term goal of eradicating child poverty by 2020 and halving it by 2010, the Government have set a Public Service Agreement (PSA) target which is jointly held by the Treasury and DWP, to reduce child poverty by at least a quarter by 2004-05. The baseline year for the target is 1998-99 when the number of children in poverty was 4.2 million when measured after housing costs (AHC) and 3.1 million when measured before housing costs (BHC). To achieve the PSA target, the child poverty rate needs to be reduced to 3.1 million (AHC) and 2.3 million (BHC). The current child poverty rate (2002-03) is 3.6 million (AHC) and 2.6 million (BHC), so the BHC measure has fallen faster than the AHC measure. Progress is measured against both baselines and the figures for 2004-05 should be available in early 2006. Section 7 will outline in more detail the progress made on the Government's PSA target for 2004-05.

Monitoring child poverty

27. In addition to the range of statistics from HBAI, the Department also produces an annual report on poverty and social exclusion - Opportunity For All (OFA) - which sets out progress against a range of key indicators. 55 trends are monitored in total, with 20 covering children and young people. PSA targets underpin the indicators, with the child poverty target being one of them. The Department also publishes the UK National Action Plan on Social Exclusion - the most recent covers 2003-2005.[22] The National Action Plan (NAP) includes indicators common to all EU Member States (the Laekan Indicators) as well as UK-specific indicators.[23]

28. Other useful information on poverty is also available through a wide range of statistics such as the DWP's administration statistics on benefits. In addition, independent analyses of poverty covering the effect of Government policies on the poverty rate and modelling what is needed to reach the Government targets has been conducted by organisations such as the Institute for Fiscal Studies and academics such as Holly Sutherland and Professor David Piachaud, and in Northern Ireland, Professors Eithne McLaughlin, Paddy Hillyard and Dr Mike Tomlinson. The Department also manages the Families and Children Study, a representative survey of British families with children which collects information on a range of issues such as employment, benefits and tax credits, income and childcare.

Child poverty and devolution

29. Although the Government's aim of eradicating child poverty by 2020 is UK wide, the child poverty PSA target is limited to Great Britain only. This is because the Family Resources Survey (FRS) from which the HBAI statistics are drawn, has so far only covered England, Wales and Scotland. From 2002-03 the FRS has been extended to cover Northern Ireland and the latest HBAI statistics include figures for Northern Ireland, Great Britain and the UK. However, it is not clear whether future PSA targets will also be extended to cover the UK. In oral evidence, the Secretary of State told the Committee that the issue would be resolved in the forthcoming Spending Review and that he was personally strongly committed to looking at child poverty from a UK perspective.[24]

30. The broader poverty indicators outlined in DWP's Opportunity For All report mainly cover Great Britain or England only. Opportunity For All also covers areas that are reserved to the UK Parliament such as employment, taxation, benefits and taxation. The devolved administrations produce their own reports, covering devolved issues. The UK Government is responsible for joining-up poverty and social exclusion work that is carried out across the UK. Opportunity For All briefly outlines the approach taken across the devolved administrations and describes some of the innovative work being undertaken across the UK.

Causes of child poverty

31. The Government's view is that the chief cause of child poverty is worklessness. There is strong evidence to support this, but other causes are also apparent. Since, to quote the CPAG again, even the most affluent people may be workless, it is necessary to look more broadly at other causes which often interact with worklessness, such as marital and relationship breakdown, unstable parenting, inadequate levels of educational attainment and healthcare provision, and involvement in crime.

32. Furthermore, work itself is not an automatic route out of poverty. Whereas poverty among lone parents is concentrated upon those out of work, poverty among couples is concentrated upon those in work.

33. It must also be remembered that more employment opportunities will not help lift out of poverty people who are genuinely unemployable, such as those with severe disabilities; people who could be employed, but choose not to be, such as young people who opt instead for further and higher education; and people who do not enter the labour market because of their commitments as, for example, parents of very young children or as carers for elderly parents.

34. In oral evidence Martin Barnes, Director of CPAG, said that the causes of poverty can be complex but can be summed up as an issue of inadequate resources, primarily financial, for which there may be various reasons with worklessness playing a central role. For example, an individual might be unable to access the labour market for a variety of reasons, as they may experience barriers to work. For some people work may not be an option at a particular point in time. Others may be subject to additional costs caused by disability.[25] Mr Barnes also referred to families having inadequate financial resources when reliant on benefits or tax credits - this point was also raised in the written evidence of other organisations.[26]

WORKLESSNESS

35. The Department's memorandum attributes the growth in child poverty over the past few decades to a growth in the number of families with no adult in employment and remarks that in spite of recent high employment rates, the distribution of employment opportunities was not shared equally between households. The increase in women's employment was concentrated in households where someone already worked and the proportion of workless households increased, so that by 1997 almost one in five children lived in a workless household.[27]

36. Worklessness is particularly associated with lone parent families. Demographic changes mean that the proportion of children living in lone parent households has now risen to one in four of all families with children, yet 45% of all poor children live in a lone parent household and the risk of poverty is much higher for children of lone parents than for couple families.[28] In 2002-03, 1.62 million children in poverty lived in lone parent households and nearly a quarter (24%) of these were in families where the parent worked. Of the remaining 1.98 million poor children living in couple families, 69% lived in households where at least one parent worked. Of the 1.88 million children living in workless families over two-thirds were in lone parent households.

37. As One Parent Families points out, most families become poor because of a fall in adult earnings and for lone parents this is mainly due to the loss of a partner.[29] Without a partner's income, and their help with childcare, many lone parents have to rely on benefits and consequently will almost always be worse off than couples.

38. The Government acknowledges that tackling worklessness in lone parent families is key to tackling child poverty. Consequently the Government has also set a PSA target to reduce the number of children in workless households by 6.5% - from 15.2% in spring 2003 to 14.2% by 2006. In addition, to target the high risk of poverty for children in workless lone parent households, the Government has a target to get 70% of lone parents into work by 2010. There is also a PSA target to increase that employment rate of lone parents and reduce the difference between their employment rate and the overall employment rate by 2006.

TRANSITIONS

39. Research conducted by researchers at the Centre for Research in Social Policy (CRSP), on behalf of Save the Children, suggested that poverty is associated with transitions as a result of lack of earnings or benefits during periods following transitions.[30] The research showed that, over a five year period, 29% of children in severe and persistent poverty were in households that had received social security benefits in all five years. Yet the majority (57%) were in households that had experienced a transition: they had either moved from not receiving benefits to receiving them (18%); from receiving benefits to not receiving them (23%); or had experienced two or more changes in either direction (16%). Looking at the working status of the household, over a five year period, nearly one in five (19%) children who experienced persistent and severe poverty were in households that had no workers in any of the five years, yet nearly two-thirds (65%) were in households that had moved between having someone and no-one in work. The research concludes that parents were attempting to move from benefits and into employment but were failing to sustain such moves. Evidence from the Families and Children Study suggests that families with a stable work status experienced substantial improvements in their living standards, but the greatest improvements were among lone parents who moved into work.[31]

40. The CRSP research also examined the impact of family transitions upon child poverty and found that nearly three in ten (29%) children in persistent and severe poverty had experienced a change between living with a lone parent, living with a couple or living independently.[32] As was pointed out by several organisations, lone parenthood is a lifecycle stage which lasts an average of five years.[33] Government intervention may be able to tackle worklessness in lone parent or couple families, but to what extent is it able to intervene in family lives to prevent lone parenthood from occurring, and is such an option desirable? In oral evidence, the Minister for Children, Young People and Families was very clear that her Department should not support any particular family structure but should invest in supporting parenting. She queried:

41. She went on to state:

42. The Committee agrees that tackling child poverty in lone parent households through helping lone parents move into work is the right approach. We also endorse the suggestion made by Sue Middleton that families in transition need adequate income and benefits to ensure they can protect their children from poverty. We will return to the issue of parenting in section 9.

INCOME ADEQUACY

43. It was argued that, for children in workless families, it is essential that benefits are set at a level which enables the child to achieve a decent standard of living.[36] The level of income needed to meet basic needs is covered in section 4 and the reasons why families may be living on a household income below Income Support levels will be discussed in section 6. Another reason why household income may prove inadequate is disability within the family, resulting in extra costs. Disability Alliance and Barnardo's both argue that additional expenses are incurred to pay for things such as extra heating, laundry, clothing, transport - especially for hospital appointments and hospital stays; and special equipment or adaptations. They also state that it costs three times more to bring up a child with severe disabilities than a child without disabilities.[37] Although benefits covering the costs of disability exist, Disability Alliance argues that take-up is low, that many receive incorrect benefit assessments and that even if the maximum benefit income is received, it often falls short of the amount required.[38]

44. In addition, although the statistics show that the risk of poverty for children in a family with a disabled parent, a disabled child, or both, is higher than for other children, Disability Alliance pointed out that these figures underestimate the full extent of child poverty, as disability benefits received are counted as income. This means that even if someone is receiving Disability Living Allowance to pay for additional costs incurred because of their disability, this will be classified as income and will therefore distort the survey figures used for HBAI.[39]

17 DWP (2004) Households Below Average Income: 1994/5 - 2002/03, Leeds: CDS Back

18 Chart updated from DWP evidence - Ev 221 Back

19 Ev 231 Back

20 The research uses a measure of poverty that identifies those children lacking socially perceived necessary items with an income measure of poverty. Back

21 Hillyard P, Kelly G, McLaughlin E, Patsios D and Tomlinson M (2003) Bare Necessities: Poverty and social exclusion in Northern Ireland - key findings, Democratic Dialogue, Report No 16. Back

22 DWP (2003) UK National Action Plan on Social Inclusion 2003-2005, Back

23 For more detail see Section 4 Back

24 Qq 473-474 Back

25 Q1 Back

26 Ev 46 Back

27 Ev 222 Back

28 DWP (2004) Households Below Average Income: 1994/5 - 2002/03, Leeds: CDS. See also, para 19 Back