Options for 2010
223. The Government is committed to halving child
poverty by 2010. As discussed in section 7, it seems likely that
the target of reducing child poverty by one quarter by 2004 will
be met, although it will not be until 2006 that data will reveal
whether this has in fact been achieved. What is necessary in order
for child poverty to be halved by 2010?
224. As yet, this goal has not been expressed in
terms of a precise PSA target. When this is done it is likely
to be based on the measurement of child poverty discussed in Section
4. The emphasis on a measure of relative poverty based on incomes
before housing costs has been questioned. In this section the
task of halving poverty measured both before and after housing
costs is assessed.
225. Appearing before the Committee, both Treasury
officials and the Secretary of State for Work and Pensions were
asked about the Government's plans for progressing from the 2004
target to the goal for 2010. They were not able to offer substantial
assistance to the Committee on this matter. Treasury officials
responded as follows:
Q355 Mr. Dismore: I am looking forward
to the 2010 target. How far do you think increases in Child Tax
Credit can actually go towards that, or do you want to change
direction?
Mr. Holgate: I think that the sort of
spending review mantra applies somewhat to that question as well.
We are now dealing with where might we get in terms of increasing
employment over the next five or six years. For example, how
successful will the Pathways to Work programme be? How much further
will we get towards the Government's target of 70% of lone parents
in work? Those are the things that we are going to have to estimate
or guess, and that will begin to show us the extent to which the
Child Tax Credit might have to be operated in order to get to
the target that we have set ourselves for 2010.
Q356 Mr. Dismore: … What proportion
of the proposed [reduction] do you think is going to result from
increased employment in both lone and two-parent families and
what you have to do in order to try and achieve that? Secondly,
to what extent is the target going to be met by increasing financial
support for this and what will that cost, and what the increased
financial support will be for non-working families …and what
will this cost?
Mr. Holgate: …you are, again, quite
understandably, begging questions that we will only be able to
answer in July.
Ms John: And even further actually, because
there are so many variables that will affect where we are in 2010.
We have talked about the difficulty of forecasting what is going
to happen in 2004/5. 2010 is more than six-fold as difficult
to contemplate.
Q367 Mr. Dismore: If that is the target
date, then you have to start developing policy to achieve it.
These must be the key elements of that?
Mr. Holgate: Yes, but, as I say, I think,
perfectly understandably, you are raising questions about the
pattern of public expenditure and some quite major decisions about
public expenditure for which ministers do not currently have an
answer, for a very understandable reason.
226. The Secretary of State was questioned on the
same matter:
Q460 Andrew Selous: So what contribution
to the 2010 target will come from a growth in employment compared
with increases in benefits and tax credits then?
Mr. Smith: I asked that very question
of my officials in preparation for this session, anticipating
that you would ask it, and they said it is very, very difficult
to attempt to make any estimate.
Q461 Andrew Selous: Even ballpark figures?
Mr. Smith: I asked them for ballpark
as well, but they would not be drawn.
Q462 Andrew Selous: So your officials
have no view?
Mr. Smith: It is not a question of having
no view. I think this is an area where actually I will make sure
if it is not already happening that it does happen, which is to
have some intensive and careful and statistical analysis because
it would surprise me if, on a statistical basis, you could not
actually make an estimate, but we do not have one to hand and,
as I say, I could not extract a ballpark estimate out of them.
227. While it is understood that the matter is currently
under review, the Committee is concerned that, if the 2010 goal
is to be achieved, a 'road map' should be published setting out
how the goal is intended to be achieved and what policy developments
are necessary for its achievement. This was suggested by several
of those giving evidence.[225]
Although there is inevitably uncertainty about the likely situation
five or six years ahead, an indicative plan of how the 2010 goal
may be achieved will serve to extend awareness of what will be
involved and sustain support for this admirable goal.
228. In the absence of any indication of how the
Government plans to progress on child poverty beyond 2004, the
Committee commissioned Holly Sutherland of the University of Cambridge
Microsimulation Unit to assess what was necessary to achieve the
2010 target.[226]
In making this assessment it must be recognised that the extent
of child poverty is affected by many things. For example, child
poverty would fall if better off people and poorer people decided
to live together; if earnings for the low paid increased; if people
moved from relatively low incomes on social security benefits
into employment on higher earned incomes; or if benefits or tax
credits improved relative to median incomes. In looking ahead
to 2010 there may be changes in:
- family structure - the number
and sizes of two- and one-parent families;
- employment patterns - will, for example, the
target of 70 percent of lone-parents in employment be achieved?
and
- benefits, taxes and tax credits in relation to
median incomes.
229. Forecasting all of these would, as the Treasury
officials stated, be difficult to contemplate. It is, however,
possible to estimate what would be needed to halve child poverty
if other things were constant - that is if family structure and
employment patterns did not change and benefits, taxes and tax
credits remained constant relative to median incomes. On this
basis, Sutherland estimates that the extra income needed to halve
poverty in 2010 would, in 2004 prices, be approximately:
- On Before Housing Cost basis £5
per child (per week)
- On After Housing Cost basis £10
per child (per week)[227]
230. The cost of such increases depends on how they
are provided.
231. At one extreme this could be provided universally
for all children regardless of family income: such universal provision
would cost £3.5 million or £7 billion per annum, depending
on whether the before or after housing cost basis were used.
232. At the other extreme, the additional income
necessary to halve poverty could be confined to those in poverty.
Only households in poverty would receive the extra income and
once they reached the poverty line they would receive no more.
Thus, a one-child family £20 below the poverty line would
receive the full increase but if they were only £2 below
the poverty line they would only receive an extra £2. This
notional system would of course result in 'bunching' of families
at the poverty line and create major incentive problems but it
indicates the cost of the most highly-targeted approach. The
cost of this targeted provision would be £0.5 billion or
£1.5 billion per annum, depending on whether the before or
after housing costs basis were used.
233. These hypothetical costs suggest three things.
First, it seems probable that very substantial further resources
will need to be directed towards families with children if child
poverty is to be halved by 2010. Second, the extent of resources
needed depends on how highly targeted the extra income is towards
the poorest families. Third, the extra resources required would,
even on a universal basis, be no more than the extra redistributed
to families with children in the years up to 2004.
234. If some part of the halving of child poverty
were achieved by increasing employment this would reduce the direct
costs for the Exchequer. Increased employment may, however, be
dependent on increased child care provision or an increase in
child care tax credits - both of which have indirect Exchequer
costs. No estimates of such costs have been made.
235. To help
reach the goal of halving child poverty by 2010, the Committee
recommends that support for each of the poorest children - measured
on the after housing costs basis - soon be increased by £10
per week.
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