Select Committee on Work and Pensions Second Report

7  The Government's anti-poverty strategy

123. In the Pre-Budget Report (PBR) it was stated that,

    "The Government's strategy for tackling child poverty involves ensuring decent family incomes, with work for those who can and support for those who cannot, and providing support for parents, It also involves delivering high quality public services and harnessing the power and expertise of the voluntary and community sectors."[127]

124. Within these strands, a wide range of initiatives can be said to form part of the anti-poverty strategy. On raising family incomes, the flagship policy is the new tax credits, introduced in April 2003, which created a portable system of financial support for families with children. Combined with Child Benefit which, as the Department points out, is now 25% higher in real terms for the first child than it was in 1997, financial support for the first child in a family is now up to £54.10 per week compared with £27.70 in April 1997.[128] Children's allowances in Income Support and other income-related benefits have almost doubled in real terms and there has been a significant increase in the Sure Start Maternity Grant. The introduction of the Working Tax Credit, including the childcare element, forms a key part of the 'making work pay' agenda as do other measures such as the National Minimum Wage. According to the 2004 Budget report, between 1997 and 2004-05, financial support for children will have increased by 72% or £10.4 billion in real terms. Financial support for families with children will be covered in more detail in section 10.

125. For those who are able to work, employment is clearly the best route out of poverty. This is illustrated in the HBAI figures which show that four out of five (79%) children in workless households, more than three in ten (32%) children in households with at least one working adult and just over one in ten (11%) children in households where all adults are working were in poverty. Research on severe and persistent poverty reinforces this picture, showing that children in workless households accounted for more than four out of five (82%) children in severe poverty. The research also showed that more than nine in ten (94%) children who were not in poverty had at least one full-time worker in the house. [129]

126. A wide range of employment initiatives forms the basis of the work element of the anti-poverty strategy. These are led by the New Deal schemes but also include initiatives such as the Pathways to Work pilots and Employment Zones. The introduction of Jobcentre Plus in April 2002 has played a key role, bringing together support for all working age people, providing a streamlined service and a work focus to the benefits system. A central part of Jobcentre Plus is delivering Work-Focused Interviews for clients and a more intensive Work-Focused interview regime is being implemented for lone parents and disabled people. These issues will be covered in more detail in section 8.

127. To enable parents to work, the Government has started to invest more resources into increasing the supply of childcare. In addition, Sure Start is focussed on helping parents of young children in deprived areas and provides a wide range of services, including supporting parenting skills and improving the health, education and emotional development of children. These issues will be dealt with in more detail in section 9.

Cross-Government anti-poverty strategies

128. It is important to remember that the target to eradicate child poverty is a cross-Government objective. The target is jointly led by the Treasury and DWP but arguably, most Departments have a role to play. In 1997, the Government established the Social Exclusion Unit to help improve Government action to reduce social exclusion by working across Government Departments on specific issues, such as teenage pregnancy, truancy and rough sleeping. In addition, the Neighbourhood Renewal Unit is responsible for delivering the National Strategy Action Plan which aims to deliver economic prosperity, safe communities, high quality education, decent housing and better health to the poorest parts of the country.[130] Both units are currently based in the Office of the Deputy Prime Minister. More recently, in June 2003, the post of Minister for Children, Young People and Families was created, based in DfES but bringing together a range of responsibilities from several Government Departments in order to provide better policy co-ordination.

129. The contributions of other Government Departments to the child poverty target will be returned to in section 12 which addresses the issue of mainstreaming child poverty.

Recent policy initiatives and the child poverty rate

130. The 2003 Pre-Budget Report marked the last opportunity for the Government to influence the child poverty rate via changes to the benefits and tax credits system in time for the 2004-05 target. Consequently, several significant announcements were made aimed at increasing financial support for families with children and at enhancing employment opportunities for parents.


131. The PBR restates the Government's goal of "…employment opportunity for all - the modern definition of full employment" and reiterates the Government's view that "employment is the best means of avoiding poverty during working life…"[131] To this end, further reforms were announced with the aim of removing the barriers to work that constrain many people. Many of the reforms were aimed specifically at lone parents and are outlined in section 8. In addition to these substantial reforms, the PBR reiterated previous commitments to increase the support available for partners of unemployed people, and expanded upon them. The Report states:

    "Despite reductions in the number of workless people, there are still 4.3 million people of working age and almost 1.8 million children living in workless households. Extending support to every adult in a household who is without work, and not just to the main claimant, is necessary to meet the Government's goals of extending employment opportunity for all and tackling child poverty."[132]

132. The New Deal for Partners (NDP) forms the basis of such support and has been in operation since April 1999. NDP is a voluntary programme providing employment and training help for partners of claimants of JSA, Income Support, Carer's Allowance and Incapacity Benefit. As with some of the other New Deal programmes, NDP suffers from low participation rates, but the evaluation showed that more than half of participants do receive positive outcomes.[133] The PBR and Budget 2004 outlined enhancements to NDP including, from April 2004, compulsory Work-Focussed Interviews and participants will have the same package of support as is currently available to lone parents. From October 2004, eligibility for NDP will be extended to partners of WTC claimants; an enhanced Job Grant will be available; and, in six pilot areas, the £20 worksearch premium will be available to families on WTC where a non-working partner agrees to join NDP and actively seek work.


133. The Pre-Budget Report (PBR) announced that the child element of Child Tax Credit (CTC) will be increased from April 2004 by £3.50 per week, or £180 per year, benefitting 7.2 million children in 3.7 million families. The Report states:

134. Alongside the increase in the child element of CTC, the PBR confirmed that the various thresholds in CTC and Working Tax Credit (WTC), and the family element of CTC (currently worth £545 per year) would all be fixed at their April 2003 levels. In oral evidence, Mike Brewer of the IFS told us that this would effectively save the Government £240 million and dilute the impact of the increase in the child element of CTC.[134] In subsequent written evidence, he informed us that this saving had already been allowed for in the spending forecasts of the previous Budget and that, compared to an indexed base, the effect of the changes to tax credits from April 2004 is to redistribute money from 2.9 million middle and high income families with children to those at the lower end of the income scale.[135]

135. IFS now estimates that the CTC reforms will lift 160,000 children out of poverty when measured after housing costs and 210,000 when measured before housing costs, at a total cost of £885 million. This means that in 2004/05, IFS calculates that the child poverty rate will be 3.1million AHC and 2.0million BHC, leading IFS to conclude that

    "…the Government should comfortably meet its target measuring incomes BHC, and is on course to just hit its target measuring incomes AHC."[136]

136. The Committee warmly welcomes the additional financial resources allocated in the 2003 PBR to families with children via the child element of Child Tax Credit which, we recognise, should ensure that the 2004-05 target will be met. We hope that this signals the Government's willingness to provide the substantial investment that will be required to meet the 2010 target.

The effect of policy initiatives on the child poverty rate

137. Changes in the extent of child poverty are the result of the interplay of many factors. Among the most important are:

138. Estimates have been made by Sutherland, Sefton and Piachaud of the effect of such changes.[137] Between 1996/7 and 2000/1 changes in population structure, or the family composition of children, had a very small effect on child poverty. Over the same period, the proportion of children in unemployed households almost halved and the effect of this and other employment changes was to reduce child poverty by some 2.5% (2.3% before housing costs, 2.9% after housing costs).[138] Thus, over the four years up to 2000/1 employment changes accounted for the bulk of the reduction in child poverty. Benefit and tax changes on balance benefited families with children but for some of the poorest families on Income Support the rise in benefits did not keep pace with the rise in median incomes.

139. There have not yet been more up to date analyses of actual changes in poverty. What can be estimated by micro-simulation is the effect of the policy changes that have been introduced. This is done by Sutherland et al converting policies in each year to a constant price basis and assuming that incomes are constant; the only change made in the poverty line for this exercise is that resulting from the policy changes.[139] On this basis, the reduction in the number of children in poverty between 1997 and 2003/4 as a result of changes in tax and benefit policies is estimated to be:
Proportion BHC AHC
Change in proportion of children in poverty 26% ?15%34% ? 24%
Change in number in poverty ('000) 3,300 ? 1,9604,420 ? 3,080

140. Thus, according to Sutherland et al the policy changes have reduced the number of children in poverty by about 1.3 million. How far child poverty actually falls depends on many other changes in population structure and in employment and earnings. Crucial to changes in poverty is the effect of rising incomes on median incomes, and consequently on the poverty line. It remains to be seen how far changes in child poverty will have been the result of policy changes and how far the product of other changes.

127   HM Treasury, Pre-Budget Report: December 2003, Cm 6042, pg 96 Back

128   Ev 224 Back

129   Ev 60 Back

130 Back

131   HM Treasury, Pre-Budget Report: December 2003, Cm 6042, pg 77 Back

132   HM Treasury, Pre-Budget Report: December 2003, Cm 6042, pg 84 Back

133   Griffiths R and Thomas A (2001) New Deal for Partners of Unemployed People: Case studies on delivery Phase 1,Employment Service Research Report ESR 77 Back

134   Q 245 Back

135   Ev 119 (vol III) Back

136   Ev 119 (vol III) Back

137   Sutherland H, Sefton T and Piachaud D (2003) Poverty in Britain: The impact of government policy since 1997, York:JRF Back

138   Sutherland et al (2003) table 6 Back

139   Sutherland et al (2003) Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2004
Prepared 23 April 2004