Memorandum submitted by One Parent Families
(CP 29)
EXECUTIVE SUMMARY
INTRODUCTION
In March 1999, the Prime Minister took the historic
step of announcing a Government commitment to end child poverty
in a generation. A target was set to end child poverty in 20 years
and halve it in 10. There is also a more specific Public Service
Agreement (PSA) target to reduce child poverty by at least one-quarter
by 2004 (ie from a baseline of 4.2 million children in 1998-99
to 3.15 million in 2004). The most recent figures show that 3.8
million children were in poverty in 2000-01 (30% of all children)
so, some progress has been made. The Government has recently consulted
to decide on a new poverty measure for the UK.
POVERTY IN
ONE-PARENT
FAMILIES
Still today, 54% of children in one-parent families
are poor—1.7 million of them -compared with just over a
fifth (22%) of children with two resident parents. Forty-five
per cent of all poor children now live in one-parent families.
Of the 2.6 million children who live in families with no-one in
paid work, 1.8 million (69%) live in one-parent families. The
hopeful sign is that the risk of poverty for anyone living in
a one-parent family has been falling—it fell from 62% in
1996-97 to 59% in 1998-99. And the latest figures show that poverty
in one-parent families fell from 58% to 53% between 1999-2000
and 2001-02. But there is still a long way to go with still more
than one-half the individuals living in one-parent families living
in relative poverty (up from 26% in 1979).
Most families become poor because of a fall
in adult earnings; for lone parents the main reason is the loss
of a partner. Short spells in poverty can be cushioned if there
are resources to fall back on, but lone parents are also the group
most likely to experience repeated or prolonged spells in poverty.
The Government aims to tackle this "persistent" poverty
through welfare-to-work policies—an attempt to reverse these
income dynamics. There is no doubt, however, that the experience
of such persistent poverty has long-term consequences. For many
it shapes the character of day-to-day life and future prospects.
GETTING THE
MEASURE OF
CHILD POVERTY
A simple threshold is needed that is easy to
communicate. Although essentially arbitrary, the 60% median threshold
is used in EU (Eurostat) and international studies and has gained
widespread acceptance as a proxy income measure. Although it presents
the Government with certain difficulties, this should not be a
reason in itself to move away from it. It is important to choose
the best measure, not the one that provides an easier target to
hit. If the 60% figure remains the top line figure for future
targets, we accept that additional tiers will be useful to provide
a more comprehensive and multi-dimensional method of tracking
child poverty—these will supplement Opportunity for All
(OFA).
In our view, there should be additional tiers
of indicators, but with 60% median, after housing costs as the
top line. The next tier down would include: deprivation, poverty
persistence, the poverty gap and perhaps a constant measure, but
only as a warning signal. To meet the political and communications
challenge we need a clear headline measure and to achieve technical
and policy credibility, we need the tiers.
There is a case for a Poverty Commission to
take responsibility for commissioning key research into poverty
and deprivation levels. The aim would be to establish a public
body, responsible for publishing poverty figures as a device to
hold this and all future Governments to account in eliminating
child poverty. There is a danger such a body could be abolished
by a future Government, but not without clearly abandoning this
key policy objective.
MAKING PROGRESS
The most recent Households Below Average Income
Figures (for 2001-02) show that child poverty has been reduced
by around 500,000 since 1997 (the year the Labour government came
into power). A report by Holly Sutherland for One Parent Families
uses policy simulation methods to identify the impact of measures
yet to be reflected in the official statistics and to look at
what further measures are needed to meet the child poverty targets.
She finds, it will have taken seven years and the latest reforms
to be introduced in 2003-04 to make up for the lone-parent benefit
cuts. And, the impact of policies in place in 2003-04 (of which
the main component is the new tax credits) is "dramatic",
compared to simulation results for previous policy regimes.
So, measures introduced by the Government since
1997 have reduced the number of children living in households
with incomes below 60% of the median. However, it is important
to note that this is not a "paper" exercise, about lifting
a number of families from just below to just above the poverty
line. The latest evidence finds that the proportion of out-of-work
families experiencing severe hardship fell from 41% in 1999 to
28% among lone parents and 22% among couples in 2001. Those in
low-paid jobs and receiving Working Families' Tax Credit were
doing even better, with fewer than one in ten experiencing severe
hardship in 2001, down from 13% in 2000.
WHAT MORE
NEEDS TO
BE DONE?
Holly Sutherland's analysis shows that if living
standards remained the same, the 2003-04 policy regime would reduce
child poverty by just enough to meet the Public Service Agreement
Target of reducing child poverty by a quarter by 2004-05. However,
as it is likely that median incomes will continue to rise, we
expect that more needs to be done. Since May 2003, One Parent
Families has been calling for an increase of £5 per child
in the Child Tax Credit, in addition to the indexation in line
with earnings already announced, to meet the 2004 target. Steps
to ensure effective tax credit administration will also be essential.
For the scheme to be successful in tackling poverty, people need
to be able to rely on receiving the right amount of tax credit
at the right time.
Holly Sutherland also shows that halving child
poverty by 2010 is achievable. She constructs alternative packages
that would achieve the target of halving child poverty on the
current measure of below 60% of median income (assuming other
changes do not reduce low incomes or increase the median relative
to low incomes). One package incorporates an increase in the NMW
to £5.50 and assumes that half the target increase in lone-parent
employment is achieved. On top of this an increase in the child
rates of CTC of £12 per week would meet the poverty reduction
target. As Holly Sutherland points out: "the most direct
way to reduce child poverty is to continue the recent trend and
to increase the value of benefits or credits targeted at families
with children".
Gregg and Harkness point out that the gains
in employment since 1998 have resulted from a package of reforms
that have not required mandatory jobsearch, nor relied on time-limited
welfare programmes and have been achieved at the same time as
welfare payments for lone parents who do not work have increased
significantly. Increases in earnings, combined with more generous
welfare payments have led to substantial reductions in child poverty
in one-parent families. These gains have matched what has been
achieved in the US since 1992, but at a much faster pace. Further
gains can be expected in the UK—following the introduction
of the new tax credits, for example. However, they conclude that
while substantial progress has been made, it is not yet on a sufficient
scale for it to be likely to reach the 70% target.
A further priority for policy should be to increase
lone parents' chances of getting better-paid, more secure employment.
As Jane Millar comments in a One Parent Families report on the
target, one of the main concerns about the Government's employment-based
strategy for lone parents is that it risks locking them into low-paid
work from which they can neither escape nor improve their situations.
She concludes that helping lone parents increase their chances
of obtaining better-paid and more secure employment is an even
tougher challenge than getting lone parents into paid work, but
essential if the Government also wants to achieve its target of
creating a fairer and more inclusive society, including the elimination
of child poverty.
The most striking, single characteristic of
the countries that have a low poverty rate and a high proportion
of lone parents in paid work (such as Sweden) is the widespread
availability of publicly funded childcare. The 2002 Spending Review
made significant further investment with funding for 250,000 childcare
places and Children's Centres in the 20% most deprived wards by
2006. However, the Work and Pensions Committee has concluded that
these resources would not be sufficient to meet the 2010 targets
on child poverty and lone parent employment. One Parent Families
therefore strongly supports the recommendation of the Work and
Pensions Committee that Children's Centres should be rolled out
to the 30% most deprived areas by 2006 (thus reaching 67% of poor
children), with a long-term commitment to establishing one in
every area. In our view, such a development would need to be provided
on a universal and publicly-funded basis to ensure sufficient
supply to guarantee a place for every child who needs one.
CONCLUSION
Significant progress has been made to date.
The Government's strategy of targeting extra financial support
at low-income families has helped to reduce poverty rates and
delivered improvements in the day-to-day lives of many low-income
families. The new tax credits, in particular, are expected to
have a significant impact on child poverty rates. However, we
expect that further increases in the Child Tax Credit (around
£5 per child) will be needed if the Government is to meet
its target of reducing child poverty by a quarter by 2004-05.
And halving child poverty by 2010 will require still further investment.
And, as Holly Sutherland comments: "since nearly all children
in one-parent families (86%) are in the bottom half of the income
distribution and at least one-half will be below the poverty line
in 2003-04, nearly any policy change which increases their income
as a group is well targeted in terms of poverty reduction."
Meeting the target of getting 70% of lone parents
into work by 2010 is a considerable challenge. The Government
has taken a positive strategy to date—involving increases
in benefits and tax credits and the introduction of the New Deal
for Lone Parents—and this has been successful in contributing
to significant increases in lone parent employment. And whereas
increases in lone parent employment in the US have had little
impact on child poverty rates, in the UK child poverty has reduced
and the living standards of the poorest families improved. However,
more needs to be done in the UK to support lone parents in balancing
work and caring for children. One Parent Families believes that
some of the key areas for future investment are investment in
childcare (through a national roll-out of Children's Centres),
improvements in the incomes of working lone parents (through a
combination of tax credits, the National Minimum Wage and investment
in training opportunities) an efficiently working CSA and reform
of Housing Benefit and the Social Fund.
One Parent Families has campaigned since 1918
to end the poverty and social exclusion faced by lone parents
and their children. Lone parents still represent the family type
at greatest risk of poverty in Britain. The risk is even greater
if they also have a large family, a disability or a disabled child
or come from one of Britain's minority ethnic communities. The
term "child poverty", however defined, implies something
that is inherently unacceptable. A social evil that demands a
policy response. And, it is part of our mission to promote policies
to bring an end to the institutionalised poverty in one-parent
families. However, this was not always a consensus view—and
for previous Governments child poverty was a hotly disputed and
contested concept.
In March 1999, the Prime Minister took the historic
step of announcing a Government commitment to end child poverty
in a generation. A target was set to end child poverty in 20 years
and halve it in 10. There is also a more specific Public Service
Agreement (PSA) target to reduce child poverty by at least one-quarter
by 2004 (ie from a baseline of 4.2 million children in 1998-99
to 3.15 million in 2004). The most recent figures show that 3.8
million children were in poverty in 2000-01 (30% of all children)
so, some progress has been made. The Government has recently consulted
to decide on a new poverty measure for the UK. There is currently
no official poverty line but the Government target uses 60% median,
equivalised, disposable, household income (used, in this paper,
after housing costs and including the self-employed). No measure
has yet been proposed as a result of the poverty measurement consultation.
In the meantime, we welcome this opportunity to set out the extent
and causes of child poverty in one-parent families, our views
on measurement, the progress made to date and finally on the strategies
needed to combat it.
POVERTY IN
ONE-PARENT
FAMILIES TODAY
Still today, 54% of children in one-parent families
are poor—1.7 million of them—compared with just over
a fifth (22%) of children with two resident parents (see Appendix
One).[415]
Forty-five per cent of all poor children now live in one-parent
families.[416]
Of the 2.6 million children who live in families with no-one in
paid work, 1.8 million (69%) live in one-parent families. Seventy-five
per cent of these children were living in poverty in 2001-02.[417]
And lone parent earnings do not seem to lift families far up the
income distribution. Fifty-five per cent of children living with
a working lone parent still fall in the bottom two-fifths of the
income distribution and for those whose parent works part-time
the figure is 71%.[418]
Three-quarters (75%) of one-parent families
appear in the bottom two-fifths of the income distribution after
housing costs (including self-employed).[419]
One-half (49%) are in the bottom one-fifth with fewer in the next
one-fifth (26%). Only 39% of couples with children are in the
bottom two-fifths of the income distribution. And the picture
is worse for children—nearly twice as many children in one-parent
families (77% in one-parent families) have family incomes in the
bottom two-fifths of the income distribution, compared with 43%
in couple families, after housing costs.[420]
The hopeful sign is that the risk of poverty
for anyone living in a one-parent family has been falling—
it fell from 62% in 1996-97 to 59% in 1998-99. And the latest
figures show that poverty in one-parent families fell from 58%
to 53% between 1999-2000 and 2001-02. But there is still a long
way to go with still more than one-half the individuals living
in one-parent families living in relative poverty (up from 26%
in 1979). In other words, 2.6 million individuals in one-parent
families (including 1.7 million children) live below the poverty
line, up from 598,000 in 1979. By this measure, individuals in
one-parent families make up 21% of those in poverty, although
they are only 9% of the whole population. They are still the family-type
at greatest risk of poverty in Britain. Now that there are more
lone parents, this poverty is more visible and many would argue
that this is evidence that the social security system to date
has strikingly failed to deal with family change.
WHY ARE
CHILDREN IN
ONE-PARENT
FAMILIES AT
SUCH RISK
OF POVERTY?
Most families become poor because of a fall
in adult earnings; for lone parents the main reason is the loss
of a partner.[421]
Short spells in poverty can be cushioned if there are resources
to fall back on, but lone parents are also the group most likely
to experience repeated or prolonged spells in poverty.[422]
Twenty-nine per cent of one-parent families spent three out of
four years between 1997 and 2000 living in poverty, compared to
11% of couple families.[423]
The Government aims to tackle this "persistent" poverty
through welfare-to-work policies—an attempt to reverse these
income dynamics. There is no doubt, however, that the experience
of such persistent poverty has long-term consequences. For many
it shapes the character of day-to-day life and future prospects.
On separation or divorce, mothers and children
usually see an average fall in their income of about £20
a week; by comparison, fathers are likely to see an increase of
about £10 a week.[424]
Like women in couples, lone mothers find that caring for young
children affects their ability to take paid work and some prefer
to be full-time mothers or work part time. The difference is that
without a partner's income (and their help with childcare) many
lone parents have to rely on benefits. With the exception of widows
' benefits, help for one-parent families has always been through
means-tested benefits paid at subsistence levels. Nearly four
in 10 one-parent families live on gross weekly incomes of less
than £150 a week, compared to just one in 10 married couples
and less than two in 10 cohabiting couples.[425]
Being a mother with children costs money, and
results in a loss of earning power. The Women and Equality Unit
estimates that a typical woman with GCSEs who stays at home for
two years and works part time for 12 years will earn £241,000
less over her lifetime than a man with equivalent qualifications—the
"female forfeit".[426]
She will also earn £140,000 less because she has two children—the
"mother gap". For a woman with no qualifications the
female forfeit is £197,000 and the mother gap grows to £285,000,
if she takes nine years off work and works part time for 28 years.
The fact that most (nine out of 10) lone parents
are women is key to understanding why so many one-parent families
are poor. Women are likely to earn significantly less than men,
to be in low-paid work, and are more likely to be employed in
the non-standard or "flexible" economy.[427]
In addition, divorce and separation mean the further loss of any
shared income. Added to the cost of children is the lack of any
independent source of income other than earnings, with the exception
of child benefit. This leads to reliance on means-tested benefits
and their attendant unemployment and poverty traps. The lack of
a second earner (or the potential for one) means that lone parents
will almost always be worse off than couples.
SEVERE POVERTY
IN TRANSITIONS
Recent evidence from Save the Children shows
once again that for lone parents, the change from living in a
couple family to a one-parent family is particularly associated
with persistent and severe child poverty. But work and benefit
transitions were also associated with children experiencing persistent
and severe poverty.[428]
For example, 57% of children in persistent and severe poverty
and 42% of those experiencing only persistent poverty had made
at least one transition on and off Income Support or JSA compared
with only 21% of children who experienced no poverty. This appears
to explain the risk-averse behaviour of those lone parents whose
own instincts tell them that the move into paid work can be risky
and the additional costs and subsequent return to benefit may
result in even greater hardship.
GETTING THE
MEASURE OF
CHILD POVERTY
Prior to 1999, the poverty threshold most commonly
used to describe child poverty was 50% of mean income, after housing
costs. Although in the 1980s this measure was criticised for being
more a measure of inequality than of poverty, there was little
public dissent from its use. Subsequently, the threshold of 60%
median income has been used as the key baseline indicator of progress
in the Government's PSA targets to help avoid chasing a moving
target. This happens when living standards improve but the number
in poverty do not fall because overall living standards, or incomes
of the better-off have risen faster than the average—a "moving
escalator effect". This is not to say that living standards
for many do not remain unacceptably low, but that it creates a
problem for the Government in achieving its target. It also faces
the problem of appearing to `backslide' if it changes the poverty
measure used.
A simple threshold is needed that is easy to
communicate. Although essentially arbitrary, the 60% median threshold
is used in EU (Eurostat) and international studies and has gained
widespread acceptance as a proxy income measure. Many believe
60% median is still the best single measure and is close to the
income thresholds derived using other methods, such as in the
Poverty and Social Exclusion Survey (using deprivation measures)
and the Low Cost but Acceptable budget standard from the Family
Budget Unit.[429]
Although it presents the Government with certain difficulties,
this should not be a reason in itself to move away from it. It
is important to choose the best measure, not the one that provides
an easier target to hit. If the 60% figure remains the top line
figure for future targets, we accept that additional tiers will
be useful to provide a more comprehensive and multi-dimensional
method of tracking child poverty and these will supplement Opportunity
for All (OFA).
Crucially, the 60% figure provides an important
record of how poor children fare in relation to the rest of the
population. The key to understanding child poverty is that it
is essentially a relative concept and this must be reflected in
any chosen measurement. The figures could be supplemented with
income values to show the level of income represented by the 60%
median threshold. It could also be accompanied by a supplementary
set of headline indicators including a deprivation measure to
offer concrete examples of the standard of living associated with
it. In addition, consideration could be given to exploring whether
the equivalence scales currently used are the best ones. This
is essentially a technical matter and researchers could help to
evaluate these.
Another issue worthy of consideration is reaching
consensus on what will constitute the abolition of child poverty.
Although this should not be allowed to distract us from the key
task of poverty reduction, it is worth at least asking whether
poverty levels will ever be reduced to nil. In the countries widely
regarded as having very little poverty, such as Sweden and Finland,
an underlying rate remains—generally around 8% (compared
to 30% here).[430]
Such low poverty levels would be welcome to many in the UK—levels
last seen in this country in the 1970s. John Hills has suggested
a more realistic target might be for Britain to aim to have one
of best three national child poverty rates in the EU. This might
be one way of making the issue explicit.
ADDITIONAL TIERS
In our view, there should be additional tiers
of indicators, but with 60% median, after housing costs as the
top line. The next tier down would include: deprivation, poverty
persistence, the poverty gap and perhaps a constant measure, but
only as a warning signal. The next tier would incorporate inequality,
low pay, debt, unemployment, employment, health, education, housing,
looked-after children and adults, progress for key disadvantaged
groups eg, lone parents, subjective well-being and ability to
participate. Efforts should be made to incorporate the indicators
being developed for inclusion at EU level by Tony Atkinson.[431]
To meet the political and communications challenge we need a clear
headline measure and to achieve technical and policy credibility,
we need the tiers.
OPF would like to be able to evaluate the success
or failure of Government policies towards one-parent families.
Thus data needs to be collected on a range of dimensions in addition
to key income measures and outcome indicators, these could include:
gender, race and ethnicity, disability, age and family type. Arguably,
some groups, such as one-parent families, certain ethnic minorities,
people with large families and people with disabilities are so
disadvantaged it is important to measure the progress they make
according to any chosen measure.
A CONSTANT OR
"ABSOLUTE" MEASURE
The addition of a constant measure to show "absolute"
progress over time has been suggested. We have some concerns about
this. It should not be used as the headline measure as income
change is always relative to the living standards of others and
as a key indicator this could be misleading. Instead, it has been
suggested it could be used as a warning sign in case progress
slows or stalls.[432]
Lack of progress on this measure would be a sign of deep failure.
The constant measure would act as a last stop warning signal to
show there is a problem, or no progress at all has been made.
One option would be to re-base it for each successive Parliament
so that its purpose is clear. An over prominent constant measure
would fail to take into account how the poorest have fared in
relation to the rest of the population.
MEASURING LEVELS
OF DEPRIVATION
We are attracted to the inclusion of a deprivation
measure as part of second tier of headline measures. The PSE survey
has the advantage of including public opinion in its methodology.[433]
Measures and poverty thresholds are based on public assessment
of a range of items deemed to be necessities. These socially perceived
necessities are then used to assess objectively who is more or
less lacking or deprived of them. This is crucial because it is
not possible to tell from HBAI who is poor and whether the threshold
really represents the real, or lived experience of poverty. HBAI
provides an indirect poverty measure and PSE provides a direct
measure. The PSE survey shows us who is poor and, also, who has
a low standard of living as a result. For example, it is possible
to have low income but not be poor—eg, when starting a business,
or to still have a relatively high standard of living even though
you have just suffered a catastrophic fall in income. To date,
there has been a degree of similarity in the levels of poverty
derived from the different methodologies—eg, HBAI and PSE
produce very similar numbers, although it is not possible to tell
whether or not they are the same people, since each is derived
from different data, methodologies and thresholds.
In the UK, this data exists in the form of the
Breadline Britain Surveys and most recently in the Poverty and
Social Exclusion Survey 1999 and the Families and Children Study.
It would have to become a regular, national survey in order to
be incorporated into a poverty measure. In our view this is essential
and helpful to social security policies such as the Social Fund
as it based on public attitudes about what items are essential.
Although there are presentational issues with this approach, these
could be minimized by making public the consensual nature of the
methodology.
TIME, PERSISTENCE
AND DEPTH
OF POVERTY
Some attention should be paid to poverty dynamics—some
people experience poverty for long periods and at frequent intervals.
Movements in and out of poverty may be brief or for some prolonged
and with a high risk of return to poverty. Lone parents are often
plunged into poverty through one life event—namely the loss
of a partner. They are also more likely to experience frequent
and prolonged periods in poverty. Such poverty has been described
as persistent, chronic or permanent poverty.[434]
This is bound to have deeper and more damaging effects on children
than short or infrequent spells in poverty.
We also need to know about the "poverty
gap", in other words how far below the poverty line people
fall. There is a danger that any poverty line could provide perverse
incentives to develop policies that lift only the easiest to reach
a short distance over a given threshold, but leave those most
at risk and experiencing the deepest poverty and lowest incomes
unaffected. The gap between actual incomes and any poverty line
is therefore crucial to record. In our view, it will be vital
to record persistent poverty and poverty gap as key components
in any poverty measurement.
THE EXPERIENCE
OF POVERTY
In addition to deprivation measures it is also
important to capture something about the experience of poverty
as perceived by those living below the poverty line. Subjective
measures and measures of social participation are key to any definition
of poverty. Some of the most important aspects of poverty are
the hardest to measure, yet they impact on a range of outcomes.
For example, self-esteem and confidence and the experience of
debt and hardship have a strong impact on readiness to work and
outcomes for children. Evidence that such perceptions are changing
would be important to public policy. The importance of people
being able to participate in their communities and not be excluded
should, in any case, be important issues for Government. Attempting
to assess these is, in our view, vital to any understanding of
child poverty.
HOUSEHOLDS OR
CHILDREN?
A question remains about whether a child can
be removed from poverty and social exclusion if their parent is
not. As academics like Sue Middleton have said (for example, in
her evidence to the Work and Pensions Select Committee Inquiry
into Tax Credits), there is no point in ending child poverty if
we end up with a nation of poor parents. The stark fact is that
lone mothers on Income Support are 14 times more likely than other
mothers to go without food themselves in order to meet the needs
of their children.[435]
Given the demonstrable sacrifice of many lone mothers on income
support, and in the interests of their children, we must also
act to prevent their poverty. We need also to capture the links
between poverty, having children and the time poverty that can
result eg, when a lone parent cannot spend enough time with the
children because s/he is working to try to keep them out of income
poverty.
MINIMUM INCOME
STANDARDS
Aside from measuring the rate and extent of
poverty—which is multi-faceted and multi-dimensional—there
is a separate question about what level of income is problematic
and what is not. As income is central to any measure of child
poverty, we should be interested in having some idea of the level
of income needed to prevent it. Since Seebohm Rowntree used budget
and dietary standards to assess how many people were poor in York
in 1901, there have been various attempts to examine income adequacy,
including Townsend, 1979[436]
and most recently the Family Budget Unit.[437]
Not since Rowntree's figures were used in the Beveridge Report
of 1942 has a Government used such evidence as a point of comparison
in setting benefit rates or in examining the adequacy of living
standards. Such standards have been criticised because, for example,
they may rely heavily on a professional or expert interpretation
of essential budgetary items, judgements about what is considered
appropriate spending (eg, alcohol) and if not regularly up-dated,
they can quickly become out-of-date and unhelpful.
John Veit-Wilson has suggested a triangulation
methodology to establish a Minimum Income Standard (MIS) by comparing
various poverty thresholds, scores gained from a deprivation index
and other sources to arrive at an agreed standard. Arguably any
such standard should represent a decent standard of income for
a modest household and not a low-cost standard, in order to ensure
social participation. A minimum income standard could provide
a public reference point or guide to the policy measures needed
to eradicate it—eg, what level of income, ability to participate
and access to services is needed to avoid it. However, this approach
is also vulnerable to being set too low and falling behind public
expectations.
A POVERTY COMMISSION
There is a case for a Poverty Commission to
take responsibility for commissioning key research into poverty
and deprivation levels. The aim would be to establish a public
body, responsible for publishing poverty figures as a device to
hold this and all future Governments to account in eliminating
child poverty. There is a danger such a body could be abolished
by a future Government, but not without appearing to abandon this
key policy objective.
A Poverty Commission might work best if it was
the body responsible for monitoring the progress of the headline
indicator and monitoring any progress, or otherwise, made. In
other words, responsible for interpretation of the evidence and
pronouncing the results—more like the Bank of England Committee
than the Low Pay Commission. Terms of reference might include
being charged with responsibility to: publish evidence on key
national, sub-national and regional child poverty measures and
indicators; inform the public on key trends and developments on
child poverty, including international comparisons; make recommendations
about any necessary methodological changes or further research
required and make recommendations.
To date, an opportunity has perhaps been missed
to draw interested parties together with Government to support
and develop an anti-poverty strategy. In Scotland and Wales there
has been more, high-level consultation both with local communities
and with NGOs. Ireland also follows a more consultative model.
A poverty commission could help to develop a process for such
participation.
MEETING THE
EXISTING TARGETS
The Government has two ambitious targets for
2010—halving child poverty and increasing lone parent employment
to 70%. The 2004 Budget and Spending Review (due to report in
Spring 2004 and for which planning is in its early stages) are
key opportunities to make the investment necessary to meet them.
From April 2003, the Government is investing
£2.7 billion in new tax credits—the Child Tax Credit
(CTC) and Working Tax Credit (WTC)—which, assuming they
can be delivered effectively, promise to boost incomes further
whether in or out of paid work. A question remains about whether
the employment target can be achieved and about what impact it
will have on child poverty rates in one-parent families. We have
tried to seek answers to these questions in two recent research
publications: One Parent Families, Poverty and Labour Policy and
Working to target: Can Policies Deliver Paid Work for Seven in
10 Lone Parents? We refer to the results later.
There are advantages to both targets as they
help us to focus policy interventions in a positive way. However,
the employment target does carry some risk, as it would be possible
to achieve this target but have little impact on child poverty—as
has happened, for example, in the US. Policy must be developed
with the child poverty target firmly in mind. In any event, the
target is extremely challenging and One Parent Families is anxious
that we should not approach 2010 and find that we are short of
the employment target and that because important investments have
not taken place, the perception hardens that we need to resort
to greater benefit conditionality in order to make up the numbers.
We could not support any move towards compulsion and are anxious
to help develop a positive approach to avoid this result.
THE CHILD
POVERTY TARGET—PROGRESS
TO DATE
The most recent Households Below Average Income
Figures (for 2001-02) show that child poverty has been reduced
by around 500,000 since 1997[438]
(the year the Labour government came into power). The report by
Holly Sutherland for One Parent Families uses policy simulation
methods to identify the impact of measures yet to be reflected
in the official statistics and to look at what further measures
are needed to meet the child poverty targets.[439]
She finds, it will have taken seven years and the latest reforms
to be introduced in 2003-04 to make up for the lone-parent benefit
cuts. And, the impact of policies in place in 2003-04 (of which
the main component is the new tax credits) is "dramatic",
compared to simulation results for previous policy regimes. Child
poverty falls by 9 percentage points (on an after housing costs
basis) to 27%, down from 36% in 1998-99 (the base-line year for
the target to reduce child poverty by one quarter by 2004-05).
So, measures introduced by the Government since
1997 have reduced the number of children living in households
with incomes below 60% of the median. However, it is important
to note that this is not a "paper" exercise, about lifting
a number of families from just below to just above the poverty
line. New research shows that the same policy measures have also
had a significant impact on the living standards of the poorest
families. The Families and Children Study has tracked changes
in living standards over time according to a measure of hardship
(whether families had poor living standards, whether they were
able to manage financially and whether they had to go without
essential items). The latest evidence finds that the proportion
of out-of-work families experiencing severe hardship fell from
41% in 1999 to 28% among lone parents and 22% among couples in
2001.[440]
Those in low-paid jobs and receiving Working Families' Tax Credit
were doing even better, with fewer than one in ten experiencing
severe hardship in 2001, down from 13% in 2000. Incomes for working
families went up by an average of £46 in real terms over
the two years of the study (1999-2001). Growth in incomes of families
who remained out of work (or in work for less than 16 hours) was
half this rate (an average of £20).
IS THE
CHILD POVERTY
TARGET ACHIEVABLE?
Holly Sutherland's analysis shows that if living
standards remained the same, the 2003-04 policy regime would reduce
child poverty by just enough to meet the Public Service Agreement
Target of reducing child poverty by a quarter by 2004-05. However,
as it is likely that median incomes will continue to rise, we
expect that more needs to be done. Since May 2003, One Parent
Families has been calling for an increase of £5 per child
in the Child Tax Credit, in addition to the indexation in line
with earnings already announced, to meet the 2004 target.[441]
Steps to ensure effective tax credit administration will also
be essential. For the scheme to be successful in tackling poverty,
people need to be able to rely on receiving the right amount of
tax credit at the right time.
Holly Sutherland also shows that halving child
poverty by 2010 is achievable. She constructs alternative packages
that would achieve the target of halving child poverty on the
current measure of below 60% of median income (assuming other
changes do not reduce low incomes or increase the median relative
to low incomes). One package incorporates an increase in the NMW
to £5.50 and assumes that half the target increase in lone-parent
employment is achieved. On top of this an increase in the child
rates of CTC of £12 per week would meet the poverty reduction
target. The employment target also has a role to play in helping
to reduce child poverty, but it cannot be relied upon to meet
it.
THE EMPLOYMENT
TARGET—PROGRESS
TO DATE
The Government's reason for setting the target
was that the majority of lone parents want to work and employment
is key to reducing child poverty.[442]
The target of getting 70% of lone parents into work by 2010 is
a considerable challenge. Progress has been made. The latest Labour
Force Survey figures (Spring 2003) show that over half of all
lone parents (53.4%) are now in paid work.[443]
This is a significant increase compared to 1997, when 45.6% of
lone parents were in paid work.[444]
However, the rate of increase has recently slowed suggesting that
an additional policy boost is needed to help more lone parents
to take paid work.
A range of factors, including changes in the
economy and in the characteristics of lone parents (a lower proportion
with a child under five, for example) have contributed to the
recent increase in lone parent employment.[445]
However, policy measures have also played an important part. Research
by Paul Gregg and Susan Harkness at the Centre for Market and
Public Organisation at the University of Bristol, finds that of
the eleven percentage point rise in the lone parent employment
rate between 1992 and 2002, five percentage points can be attributed
to policy reforms.[446]
IS THE
EMPLOYMENT TARGET
ACHIEVABLE?
Seventy per cent is close to the employment
rate of mothers in couples and other countries have lone parent
employment rates at this level or above. However, this does not
necessarily mean the same is achievable for lone parents in the
UK by 2010. It would certainly be unacceptable to meet the employment
target and, at the same time, fail to meet the child poverty target.
Holly Sutherland's work for One Parent Families provides further
evidence of the challenging nature of the target. She shows that
only if all lone parents whose youngest child is aged at least
three (excluding full-time students and those in receipt of a
disability benefit for themselves or a child) move into work,
the target is just met.
In a recent One Parent Families report on the
employment target,[447]
Jane Millar of the University of Bath considers that the target,
while certainly ambitious, is not completely out of line with
what would be possible and acceptable for lone parents in Britain
by 2010. But this is only because any hours of work are included
in measuring the employment rate. If only work of 16 hours was
included, the target would look not just ambitious but almost
certainly impossible. In any case, to get anywhere near the target
there is much to be done. Options include directing extra resources
at particular lone parents, supporting low-hours work as a "stepping
stone" to full-time work and including participation in education
as part of the target. In the same report, Richard Berthoud of
the Institute of Social and Economic Research at the University
of Essex analyses trends in employment between 1992 and 2000.
Running these trends forward, 62% of lone parents would be in
work by 2010 and the proportion would reach 70% by 2015. The trends
may be over-optimistic, however, because the improvement in labour
demand in the mid-90s cannot be counted on to continue. On the
other hand, many of the recent policies to help lone parents into
work had not had time to have much effect by 2000, so we are observing
a pre-policy trend, not the outcome of intervention.
Gregg and Harkness also point out that the gains
in employment since 1998 have resulted from a package of reforms
that have not required mandatory jobsearch, nor relied on time-limited
welfare programmes and have been achieved at the same time as
welfare payments for lone parents who do not work have increased
significantly. They comment that given the scale of the gains,
the results are hugely important for the US debate on welfare
reform. Increases in earnings, combined with more generous welfare
payments have led to substantial reductions in child poverty in
one-parent families. These gains have matched what has been achieved
in the US since 1992, but at a much faster pace. Further gains
can be expected in the UK—following the introduction of
the new tax credits, for example. However, they conclude that
while substantial progress has been made, it is not yet on a sufficient
scale for it to be likely to reach the 70% target.
POLICY DEVELOPMENTS
NEEDED
Lone parents express a strong orientation towards
paid work[448]
and want to work when it is possible for them to combine this
with their caring responsibilities. The strategy for meeting the
employment target needs to be developed by taking a positive approach
to what lone parents need to balance work and caring for children
and the overall objective of ending child poverty must be kept
clearly in mind. The analysis by Paul Gregg and Susan Harkness
shows that the Government has been successful in taking a positive
approach so far. And, Holly Sutherland has demonstrated that increasing
the value of benefits or credits targeted at families with children
is key to child poverty reduction. But direct wage and income
subsidy is expensive and more needs to be done in other areas
as well, for example, investment in childcare, improving the incomes
of lone parents working part-time and measures to improve work-life
balance. But the nature of the labour market is also important.
Higher earnings and more and better jobs with training and prospects
are also important if paid work is to provide a route out of poverty
for more families.
NEW DEAL
FOR LONE
PARENTS
The New Deal for Lone Parents (NDLP) is a voluntary
welfare-to-work programme to help encourage lone parents into
work. A package of advice, information and support is offered
through Personal Advisers (PAs). Recent evaluation has found that
most lone parents have a brief engagement with the programme involving
just one or two meetings with a PA. Drawing on currently available
research, Martin Evans points out that around 10% of lone parents
on Income Support participate in New Deal for Lone Parents (NDLP).[449]
Participation in NDLP significantly increases chances of finding
work, with 50% of participants leaving benefit after nine months,
compared to 22% of non-participants. However, extrapolating this
to the whole population of lone parents on income support, gives
a much lower headline figure: between 1 and 2% of lone parents
leave benefits every six months because of the programme.
This is a time of considerable change for Jobcentre
Plus (both in the internal and external policy environment). It
will be a challenge to maintain the standard of the Personal Adviser
service in this context. And at the same time, NDLP needs to develop
in the services offered if it is to play a more significant role
in meeting the lone parent employment target. NDLP is currently
less effective in engaging lone parents who need intensive support
to move toward work.[450]
Those looking for higher-level jobs requiring specialist training
are also poorly served.
In terms of those lone parents who need more
intensive support, it is important that NDLP is able to offer
amore than the one or two interviews most participants get at
present. A more substantial range of options needs to be on offer.
It is important to ensure that Jobcentre Plus has good links in
each area, with organisations able to provide intensive one-to-one
support over a period of time. In a previous report, the Work
and Pensions Committee concluded that that there was a "missing
level of infrastructure" on which PAs could systematically
draw to assist those who were least job-ready, in terms of a comprehensive
spectrum of organisations specialising in supporting people into
work.[451]
In its report on the Government's Employment Strategy, the Committee
recommended that additional funding, provided on a more flexible
basis, should be made available by Jobcentre Plus to organisations
able to provide such services. It is vital that effective referral
mechanisms are established between such organisations and Jobcentre
Plus. As we go on to discuss, there also needs to be an increased
emphasis on education and training opportunities to meet the needs
of lone parents, particularly those who have been out of the labour
market for a time.
NDLP also needs to develop services to support
lone parents to progress in work. The Employment Retention and
Advancement Demonstration Project is an important and encouraging
development in this respect. The project will run in six areas
from October 2003. However, because retention and advancement
needs to be measured over the medium to long-term, it will be
some time before any results feed into mainstream policy.
PART-TIME
WORK
For lone parents, part-time work is a very important
option, making it possible to balance work and childcare. A recent
study found that half of lone parents moving into work and claiming
WFTC in 2001, moved into jobs where they worked for between 16
and 23 hours a week.[452]
For new job-entrants, wage rates tend to be at or just above the
National Minimum Wage (NMW).
Tax credits play an essential part in making
low-paid, low-hours work possible for lone parents. They have
done a considerable amount to reduce hardship among this group.
The Families and Children Study shows the proportion of lone parents
on Working Families Tax Credit experiencing severe hardship fell
from 13% in 2000 to fewer than one in 10 in 2001.[453]
However, it is clear that hardship continues and further increases
are needed.
Analysis by Holly Sutherland for One Parent
Families[454]
shows that the wages and in-work credits and benefit combination
has a major impact on the risk of poverty for those who enter
work. However, the indications are that even after the introduction
of the new tax credits in April 2003, the gain to work for lone
parents entering work at around 16 hours a week is relatively
modest. The average gain to work for lone parents entering work
at 16 hours on the NMW is £34.03. (See Table 1, in Appendix
Two). Unsurprisingly, the average gain rises as a result of an
increase in wages or an increase in hours worked. The average
gain for lone parents working 30 hours a week on NMW is £67.95.
For lone parents working 16 hours at £5.50 an hour, the average
gain is £43.51. These relatively modest gains can be eroded
by costs of working, such as the requirement to meet 30% of formal
childcare costs and any contribution towards housing costs. More,
therefore, needs to be done to improve the gains to work for lone
parents working around 16 hours.
The modelling also estimated the effects of
entering paid work. Perhaps not surprisingly, the reduction in
child poverty is greater if longer hours are worked or wage rates
are higher. The study shows that low hours, part time jobs alone
do not guarantee a move out of poverty for lone parents, even
if the 70% work target is met. The model assumes that certain
lone parents will move into work by 2010.[455]
Before their parent enters work, 90% of this group of children
are in poverty. If a lone parent moves into work at 30 hours a
week on the National Minimum Wage (NMW), the child poverty rate
falls to 11% (in work). At 16 hours the increase in income is
less often sufficient to remove the household from poverty—the
rate falls to 53% (see Table 2, Appendix Two). Job entry at 16
hours on a higher NMW of £5.50 an hour reduces the child
poverty rate of job entrant families to 38%.
To summarise, under 2003-04 tax and benefit
policies, children whose parents are able to work at least 16
hours per week are less at risk of poverty. However, it is clear
that even paid work for long part-time hours is not a 100% guarantee
against incomes below the poverty line and—given their parenting
responsibilities—for some lone parents part time work is
the only feasible option. More help is needed to overcome the
barriers to start and remain in part-time work, to be better-off
and to progress in work. Childcare provision and improved help
with childcare costs will be key to achieving this goal.
Holly Sutherland finds that the most direct
way to reduce child poverty is through benefits or credits targeted
at families with children. An increase in the NMW, is less well
targeted on low-income families. However, many lone parents leaving
Income Support go into jobs at or close to the NMW and an increase
in it would make work more worthwhile for those on maximum Working
Tax Credit (WTC). Sixteen hours work at the NMW at its current
rate of £4.50 produces a weekly income of £72, which
is £25 below the threshold point at which WTC starts to be
withdrawn (£97). So there is considerable scope to increase
earnings and still receive maximum WTC. An increase in the NMW,
by making work more worthwhile, would therefore contribute to
the child poverty strategy as a whole. Getting better "entry-level"
jobs would also help. These jobs present a dilemma about the quality
and prospects offered by some part-time work. Although preferable
as a working pattern for many lone parents, the jobs are often
low-paid and offer little in the way of advancement. It is important
at least to ask whether there is anything the Government can do
to influence the quality of these jobs?
TRAINING AND
EDUCATION
A further priority for policy should be to increase
lone parents' chances of getting better-paid, more secure employment.
As Jane Millar comments in a One Parent Families report on the
target, one of the main concerns about the Government's employment-based
strategy for lone parents is that it risks locking them into low-paid
work from which they can neither escape nor improve their situations.[456]
She concludes that helping lone parents increase their chances
of obtaining better-paid and more secure employment is an even
tougher challenge than getting lone parents into paid work, but
essential if the Government also wants to achieve its target of
creating a fairer and more inclusive society, including the elimination
of child poverty.
One Parent Families believes there also needs
to be an increased emphasis on education and training opportunities
to help lone parents access better jobs. Just over half (51%)
of lone parents on Income Support have neither academic nor technical
qualifications and half mention concerns about skills or experience
as a reason for not being in paid work.[457]
There is a clear relationship between interest in work and interest
in training, with lone parents seeing training as something to
help them get the right skills to get good jobs in the longer
term.[458]
The evidence suggests that NDLP currently has little impact on
the sort of job lone parents enter from Income Support, these
tending to be in low-paid, low-skilled occupations associated
with high turnover and little opportunity for progression and
in-work training. Few participants receive help with education
and training through NDLP (around 6-7%).[459]
In fact, the guidance discourages it, steering lone parents towards
work in the first instance.[460]
The recently published Skills Strategy recognises
that more needs to be done to support sustainable employment and
that this is more likely to happen where jobseekers have skills,
and the jobs they gain offer continuing training.[461]
The fact that the National Employment Panel has been asked to
look at how the issue should be taken forward is welcome. Investment
in training to support lone parents in accessing sustainable employment
should be one of the key priorities for the Spending Review.
A useful model for such training is the Ambition
programme, which has the specific aim of helping people at a disadvantage
in the labour market to find high-quality, well-paid and sustainable
jobs in sectors where skill shortages exist. It will be a challenge
to get such schemes off the ground and support lone parents' participation
in them. However, the establishment of a range of such schemes
must be a priority. There should be excellent opportunities for
doing this in the public sector.
CHILDCARE
The most striking, single characteristic of
the countries that have a low poverty rate and a high proportion
of lone parents in paid work (such as Sweden) is the widespread
availability of publicly funded childcare.[462]
The Daycare Trust calculate that the "childcare gap"
in England is closing—down from one childcare place for
every seven children under eight in 2001 to one for every five
in 2003.[463]
The 2002 Spending Review made significant further investment with
funding for 250,000 childcare places and Children's Centres in
the 20% most deprived wards by 2006. However, the Work and Pensions
Committee has concluded that these resources would not be sufficient
to meet the 2010 targets on child poverty and lone parent employment.[464]
More needs to be done. Just over half (54%)
of all poor children live in the 20% most deprived wards, and
just over two thirds (67%) in the 30% most deprived wards.[465]
Extending the coverage of Children's Centres should ensure more
poor children had access to childcare. One Parent Families therefore
strongly supports the recommendation of the Work and Pensions
Committee that Children's Centres should be rolled out to the
30% most deprived areas by 2006 (thus reaching 67% of poor children),
with a long-term commitment to establishing one in every area.
In our view, such a development would need to be provided on a
universal and publicly-funded basis in order to ensure a sufficient
increase in the supply of childcare to guarantee a place for every
child in a one-parent family who needs one.
WORK-LIFE
BALANCE
Lone parents face significant challenges in
balancing work and family life—as sole breadwinners and
carers. Recent developments, such as improved maternity pay, unpaid
parental leave and the right to request flexible working are important
steps forward. Improvements for the future include introducing
a right to work flexible hours (not just the right to request)
and, crucially, the introduction of paid parental leave. The existing
unpaid provision remains a right on paper only as most lone parents
cannot afford to take unpaid time off. It would be important that
any leave should be flexible so that days or part-days could be
taken. This would allow more lone parents to reduce their hours
for a time, perhaps at difficult or important points in a child's
life—and also at the point of becoming a lone parent; a
time when many lone parents end up leaving work. The right to
flexible working arrangements should be extended to parents of
children older than six, and for those following divorce or separation.
There should be a right to work flexible hours, subject to a statutory
objective justification or harm test along the lines used in other
countries with such a scheme. There should be no small employer
exemption.
Work-life balance issues figure high on the
list of barriers to work for lone parents; barriers that continue
to be stressors once work is found. Forty-five per cent of New
Deal lone parents think employers won't employ them because of
their childcare responsibilities.[466]
Half (51%) said they wanted to work less than 30 hours a week.
Only 10% wanted to work fewer than 16 or greater than 30 hours.
In a recent survey of One Parent Families' members, lone parents
said they were prevented from working because of "jobs that
don't fit around school hours" (33%), followed by "lack
of adequately paid jobs" (16%) and lack of affordable childcare
(14%).[467]
Lack of suitable childcare, and inflexible work and training provisions
were also mentioned.
TAX CREDITS
One Parent Families welcomed the introduction
of the new tax credits, mainly because of their impact on child
poverty rates. However, to maximise the success of the tax credit
scheme in tackling child poverty, people must be able to rely
on receiving the right amount of tax credit at the right time.
The Inland Revenue has faced a huge task in getting the scheme
up and running. The difficulties experienced in doing so were
documented in a recent report by the Treasury Select Committee.[468]
Clearly, steps must be taken to ensure that
the Tax Credit Office is in a position to cope with periods of
intense activity in the future. Large demands on Inland Revenue
resources at the beginning and end of the tax year are a feature
of the new scheme. Full details of how the Inland Revenue expect
to manage the process at the end of the first year of the scheme
(April 2004) are not yet available. In one respect the process
should be much easier next year. The majority of people will already
have tax credit awards or Income Support/income-based Jobseekers
Allowance in payment. These can be allowed to run on until the
award for 2004-05 is in payment, thus ensuring the interruptions
in income experienced this year are not repeated. On the other
hand, it will also be the first end-of-year reconciliation, where
entitlement for the year just gone will be finalised based on
actual income. There is then potential for under or overpayments
to arise and people will be notified of this. Where people have
been overpaid, the preferred method for recovery will be by reducing
the tax credit award the following year.[469]
Notification of this could come as a considerable shock to those
not expecting it.
The quality of information and advice provided
by Jobcentre Plus and the Inland Revenue are vital to ensuring
people understand their rights in relation to tax credits as well
as their responsibilities (for example, in terms of the changes
they need to report.) A feature of the new scheme is that annual
awards are affected by changes in circumstance over the year.
For example, changes in working hours, income, childcare costs,
family size or disability may affect entitlement. Failing to report
certain changes—becoming a couple or lone parent, or childcare
costs stopping or decreasing "significantly"' (ie by
£10 on average or for four weeks in a row, depending on how
costs were calculated in the first place)—gives rise to
liability for a penalty.
Experience of a similar scheme in Australia,
indicates that people had particular difficulties forecasting
income and a significant number were overpaid in the first year.[470]
To address this, the Australian Government implemented a continuing
strategy, at every contact and through the media, to remind parents
of the need to report changes. In the UK, we have the opportunity
to learn from the Australian experience and implement such a strategy
at an early stage. In One Parent Families' view, this should include
an advertising campaign, including posters in places such as doctor's
surgeries, nurseries and on public transport, reminding parents
of the sorts of changes they need to report. It is also absolutely
crucial that Jobcentre Plus, as well as Inland Revenue staff fully
understand the scheme and are able to advise effectively on this
issues. One of the difficulties is that the rules for reporting
changes are fairly complicated. Some changes (such as a "significant"
reduction in childcare costs or becoming a lone parent or one
of a couple) must be reported within three months in order to
avoid overpayment and liability for a penalty. For other changes
there is an option as to when to report it. The complexity of
the issue makes it particularly important that the quality of
advice provided by Inland Revenue and Jobcentre Plus is high.
Rigorous monitoring arrangements need to be in place to ensure
this is the case.
Where an overpayment occurs, it is vital that
parents understand the basis on which recovery may take place.
Care must be taken to ensure that overpayments are not recovered
at a rate that causes hardship or damages work incentives. The
Inland Revenue's Code of Practice on overpayments should also
make it clear that there are circumstances in which recovery will
not be appropriate—for example, where the Inland Revenue
has failed to adjust entitlement in response to a notified change
of circumstances or where the overpayment was caused by a former
partner.
HOUSING BENEFIT
The New Deal Taskforce Group on Lone Parents
found that significant failings in Housing Benefit (HB) administration
act as a major disincentive to work.[471]
It concluded that the issue needed to be tackled urgently if the
70% work target was to be reached. Reforms to HB administration
are currently being implemented.[472]
Also, a system of "standard housing allowances" is being
introduced in "Pathfinder areas" from October 2004.
Claimants will receive a standard amount of help with rent based
on the area in which they live and the number of occupiers of
the property.[473]
The aims include increased transparency (it will be easier to
find out in advance how much of the rent will be covered) and
simplicity (by removing the need for complex rent restriction
rules).
The operation of the scheme in the Pathfinder
areas is being evaluated but an intention to extend the scheme
nationwide has already been announced. Improved HB administration
is clearly a priority and simpler rules, through standard housing
allowances, may be key to achieving this. However, evaluation
must look carefully at the impact on family incomes where the
full rent is not met by HB and whether or not it is possible to
move to different accommodation.
Another key concern is the interaction of housing
benefit with tax credits and the impact on work incentives, leading
to very high marginal deduction rates. Recent analysis of the
impact of reforms between 1997 and 2001 found that a lone parent
eligible for HB gained just £15 a week for full-time work
and virtually nothing for part-time work as any gains from additional
tax credits were mitigated by lower HB entitlement.[474]
The number of households facing high marginal deduction rates
(over 80%) falls only slightly with the introduction of the new
tax credits, from 255,000 to 245,000.[475]
The earnings disregard is to be increased by £11.90 from
April 2004,which should help increase gains to work for those
already on HB. However, it will also increase the number of people
eligible for HB and therefore subject to high marginal deduction
rates. In the longer run, one way of mitigating the problems caused
by very high marginal deduction rates would be to introduce a
housing credit linked to the Child and Working Tax Credit. There
would be very significant issues to consider before such a step
is made. For example, would it be necessary to move yet another
large area of DWP responsibility to the Inland Revenue, and what
would the implications be?
SOCIAL FUND
Reform of the Social Fund is urgent. It will
be hard to reach Government anti-poverty targets, particularly
if new ones are introduced around severe and persistent poverty
without sweeping reform. In a joint report—Lump Sums: Roles
for the Social Fund in Ending Child Poverty—One Parent Families,
the Family Welfare Association and Child Poverty Action Group
have proposed a series of changes to bring the Fund in line with
government targets on poverty, employment, decent housing, social
and financial exclusion.
As it stands, the Fund is failing to help many
of the families in greatest need. The use of discretion, local
budgets and tight cash limits means many applicants are turned
away and are having to live without essential items. Even official
evaluation of the Fund indicates that the needs of people who
do not receive awards are just as great as those who do. Spending
on loans far outweighs that on grants and applicants can be refused
a lump sum payment even when they have an identifiable need. Many
applicants are deemed too poor to qualify for a Social Fund loan,
because of their existing debts, so the poorest and most in need
are least likely to receive help. And those who do receive help,
can be forced below benefit levels in order to meet repayments.
New research from Save the Children also shows that those at most
risk of severe and persistent poverty are the least likely to
use the Social Fund and this is likely to be because it pushes
their income below benefit levels through direct deductions.[476]
Catalogues and personal loans are often preferred sources of borrowing
as there is more control over outgoings (however swingeing the
interest rate). The Social Fund is therefore a failure at providing
lump sum and emergency help to the poorest families.
One Parent Families' research uses new analysis
of the Families and Children Study (FACS) commissioned for the
report.[477]
This analysis shows, for example, that in 2000-01, 36 of families
who had moved from being a couple family to a lone parent family
lacked shoes, 29% lacked an adult coat and 29% lacked toys/sports
gear. In line with Government's anti-poverty targets, the Fund
should be largely replaced by a set of "inclusion funds"—mainly
grants—focused on providing the poorest families with basic
essentials for a decent home and healthy children. Our detailed
costings show that in one year, Stages One and Two would cost
between £450 and £465 million to implement. Some of
this could come out of the annual £678 already allocated
to the Social Fund Budget (2003-04 figures).[478]
CHILD MAINTENANCE
The significance of child support reform to
the achievement of the key Government targets should not be underestimated.
Receipt of child maintenance, with improved rates of compliance
could make a positive contribution to lone parent incomes, to
the efforts to encourage more to move into paid work and also
towards the child poverty targets. Receipt of child maintenance
is strongly associated with employment and can aid the transition
to paid work. The fact that reform is proceeding so slowly and
that so few have actually received a Child Maintenance Premium
and that inevitably, compliance rates will be slow to rise, is
a cause for great concern.
Just over three in 10 (31%) of lone parents
get any child maintenance from their child's other parent.[479]
Where child maintenance is due to be collected through the Child
Support Agency (CSA) nearly one-half do not get full payment—only
54% receive the full amount, 22% receive part-payment and the
remaining 24% get nothing.[480]
Where child maintenance is paid, it is an important part of a
lone parent's income provided they can rely on regular payments.
Receiving child maintenance helps lone parents to work. Twenty-five
per cent of lone parents in receipt of child maintenance in 1999
had moved into work by 2000, compared with 12% of those with no
maintenance.[481]
Lone parents receiving child maintenance are nearly twice as likely
to be in paid work as those without—73% compared to 40%.
However, research data over a three-year period shows that 37%
of lone mothers receive some child maintenance in one year or
another, but only 13% received continuous support in all three
years.[482]
The new child support formula will deliver lower
average payments to children in one-parent families than the current
formula (around £30 compared to £39 at present). At
the time of the reform white paper, it was claimed that three-quarters
of lone parents would be better-off. However, 39% of working parents
with care will lose under the new formula according to a recent
parliamentary answer.[483]
One Parent Families was prepared to support child support reform
on the grounds that more money would be delivered to parents with
care through higher compliance rates, to counteract the formula
reductions. Progress to date is not encouraging. Also, although
90% of those on IS stand to gain from the child maintenance premium,
very few have received it to date and it will be some time before
many more do.
The Government has said it wishes to increase
the rate of compliance with child support assessments to 85%.[484]
And there is a Public Service Agreement target to double the proportion
of parents with care on Income Support and income-based Jobseeker
's Allowance who receive maintenance for their children to 60%
by March 2006.[485]
In the end, the success of the plans will stand or fall by whether
the new, simpler formula actually results in more non-resident
parents paying all, rather than part, or none, of what they owe.
However, compliance targets for 2003-04 are not as ambitious as
we would have hoped. Levels have been set at 78% for case compliance
and 75% for cash compliance.[486]
Meanwhile the amount of money owed to lone parents continues to
rise. According to the CSA Annual Report in 2002-03 alone there
was £664 total debt to the CSA with over one third deemed
uncollectable or deferred and a further £937 pre-2001-02
debt also deemed uncollectable. More recently Andrew Smith confirmed
to the Work and Pensions Committee that a historic total debt
of around £2.8 billion is now deemed uncollectable.[487]
The CSA has to overcome its history of failure and begin to deliver.
And, in order to achieve this, it is crucial that the Child Support
Agency is adequately resourced to deliver on its targets.
Ultimately, we need a guaranteed child maintenance
system like those found in a number of European countries where
at least a minimum level of child support is paid up front to
the parent with care at the same time as Government enforcement
agencies pursue collection from the NRP. An efficiently working
CSA is one step towards achieving this. For some time, One Parent
Families has felt that the CSA would be in a better position to
focus on collection and enforcement if it were placed within the
Inland Revenue (IR). The creation of new tax credits means it
is harder to envisage the IR having the capacity to take this
on. Also, if housing costs (in the form of a housing credit) may
also be transferred to IR, it would seem very difficult to countenance
such a move. In our view there is still a powerful case for the
CSA to move to the IR. Therefore, a question arises about whether
tax credits and any future housing credit should remain at the
IR or be transferred back to DWP. We understand there are arguments
against this, but we think, at some stage, the balance of activities
should be seriously reconsidered.
BLACK AND
MINORITY ETHNIC
LONE PARENTS
Poverty rates nationally in the Bangladeshi
and Pakistani communities are high. Therefore, if lone parents
are also from these communities, their risk of poverty is likely
to be among the highest for any group in Britain. And If they
have a large family, the poverty rates will be higher still. It
is clear that employment rates among lone parents from different
minority ethnic groups are also very different. For example, 31%
and 27% of Asian British and Chinese lone parents respectively
are in paid work, compared to 50% and 55% of Black British and
white lone parents. Black British lone parents are the most likely
to work full-time (35%) compared to 27% of white lone parents.
Little account is taken of these differences in the provision
of services through Jobcentre Plus and NDLP. Also, childcare needs
are different and for many lone parents, especially from the Bangladeshi
and Pakistani communities there may be no tradition of paid work
at all. Services such as Sure Start have service targets for smoking,
literacy and labour market participation—these may be completely
unrealistic or inappropriate to these lone parents. More work
is needed in this area.
LARGE FAMILIES
One-parent families are, on average, smaller
than couple families having 1.7 children compared to 1.8 for all
couples and 1.9 for married couples.[488]
Fifty-four per cent have only one child, however and only 14%
has three or more children.[489]
Although a relatively small problem for one-parent families, there
are nevertheless some policy issues to be addressed. The risk
of poverty for larger families is significantly increased and
the barriers to work considerably higher—eg, housing costs
and childcare costs are likely to be significantly higher and
the organisational stress considerable. Policy does not respond
to these issues very well. For example, the job grant does not
fully compensate for the loss of the IS run-on for larger families
and childcare cost limits do not rise if there are more than two
children. This needs to be tackled.
LONE PARENTS
WITH DISABILITIES,
DISABLED CHILDREN
More than one-quarter of lone parents has a
disability or illness (26%) and 16% say this restricts their ability
to take paid work.[490]
For those doing less than 16 hours work the prevalence of work-restricting
disability was higher at 23%. Also, one-quarter of lone parents
has a child with a disability or illness (24%) rising to 31% for
those working fewer than 16 hours. For 10% this restricts the
work they can do. This has implications for the Government's employment
strategy as discussed below. But social security policy is also
implicated. Few lone parents would seem to be claiming incapacity
or carers benefits—either because they are unaware they
can or because it would be means-tested against income support.
Nevertheless there could be better-off issues for some. Childcare
costs and housing costs are also likely to be significant for
this group. Again, this should be considered in relation to reform
of housing benefit and of the childcare element in the working
tax credit.
LONE PARENTS
IN LONDON
It is clear that work incentives are particularly
poor for lone parents in London. There are more lone parents out
of work and receiving income support in London and therefore levels
of child poverty are high. The combination of high childcare costs
and high housing costs together with low wages means that tax
credits may be less helpful to lone parents trying to take paid
work in London. The childcare tax credit ceiling and housing benefit
tapers mean help is withdrawn very early. The fact that lone parents
have to pay 30% of childcare costs and may also have very high
housing costs means that many London lone parents are paying a
higher contribution towards these costs than in other parts of
the country. Fewer lone parents in London claimed the Working
Families' Tax Credit than in other geographical areas. There are
clearly very steep barriers in the way of lone-parent participation
in London. Action is needed to address this situation and make
the system work better for lone parents in London.
It is worth exploring the possibility of subsidising
parents entering employment and training in strategic areas. There
are a number of mechanisms that could be adopted. One suggestion
might be to lobby for a higher ceiling or maximum in the childcare
element of the Working Tax Credit. This would have to be restricted
to childcare costs in London. Generally, we think differential
benefit rates around the country is deeply undesirable as this
could lead to poorer living standards in cheaper areas. Rates
would also be difficult to set because o the need to set boundaries
to the differential rates. Neighbouring Boroughs and wards may
have very different childcare provision and costs. But a regional
element in tax credits could perhaps be justified on the grounds
that costs are greater and incentives to work much poorer in London.
In the end, probably the best way to tackle this problem is to
ensure a ready supply of cheaper, publicly funded places through
the universal provision of Children's Centres.
CONCLUSION—WHAT
NEEDS TO
BE DONE
Significant progress has been made to date.
The Government's strategy of targeting extra financial support
at low-income families has helped to reduce poverty rates and
delivered improvements in the day-to-day lives of many low-income
families. As Holly Sutherland points out: "the most direct
way to reduce child poverty is to continue the recent trend and
to increase the value of benefits or credits targeted at families
with children".[491]
The new tax credits, in particular, are expected to have a significant
impact on child poverty rates. However, we expect that further
increases in the Child Tax Credit (around £5 per child) will
be needed if the Government is to meet its target of reducing
child poverty by a quarter by 2004-05. And halving child poverty
by 2010 will require still further investment. And, as Holly Sutherland
comments: "since nearly all children in one-parent families
(86%) are in the bottom half of the income distribution and at
least one-half will be below the poverty line in 2003-04, nearly
any policy change which increases their income as a group is well
targeted in terms of poverty reduction."[492]
Meeting the target of getting 70% of lone parents
into work by 2010 is a considerable challenge. The Government
has taken a positive strategy to date—involving increases
in benefits and tax credits and the introduction of the New Deal
for Lone Parents—and this has been successful in contributing
to significant increases in lone parent employment. And whereas
increases in lone parent employment in the US have had little
impact on child poverty rates, in the UK child poverty has reduced
and the living standards of the poorest families improved. However,
more needs to be done in the UK to support lone parents in balancing
work and caring for children. One Parent Families believes that
some of the key areas for future investment are investment in
childcare (through a national roll-out of Children's Centres),
improvements in the incomes of working lone parents (through a
combination of tax credits, the National Minimum Wage and investment
in training opportunities) an efficiently working CSA and reform
of Housing Benefit and the Social Fund.
Alison Garnham
One Parent Families
3 October 2003
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Uses a threshold of 60% median, household, equivalised income,
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The Policy Press/ISER; and Hill M S & Jenkins S P (1999) Poverty
Among British Children: Chronic or Transitory?, in Bradbury B,
Micklewright and Jenkins, Falling In, Climbing Out: the dynamics
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435
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436
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437
Parker H (Ed) (2000) Low cost but acceptable, a minimum income
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438
Brewer M, Goodman A and Shephard A (2003), How has child poverty
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439
Sutherland H (2002), One parent families, poverty and labour
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440
Vegeris S and Perry J (2003), Families and Children 2001: Living
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441
In the IFS Green Budget (Chote R, Emmerson C and Simpson H (2003)
The IFS Green Budget: January 2003, London: IFS) it was
estimated that Child Tax Credit needed to increase by around £3
per child to meet the target. IFS updated its analysis on 13 March
2003 following the publication of the Households Below Average
Income Statistics for 2001-02. On this basis, One Parent Families
is calling for an increase of around £5 per child in the
Child Tax Credit. Back
442
HM Treasury, Budget 2000. London: The Stationery Office. Back
443
Figures provided to One Parent Families by the Labour Force Survey.
Estimates fewer than 10,000 are likely to be unreliable and estimates
above this level are subject to a relative standard error of about
20% and an approximate 95% confidence interval of +/¸ 4,000.
Crown copyright 2003. Back
444
Evans M et al (2003), New Deal for Lone Parents: Second Synthesis
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445
Alan Marsh, Helping British lone parents get and keep paid work,
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446
Gregg P and Harkness S (forthcoming-August 2003), Welfare Reform
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447
Millar J and Berthoud R in Thurley D (ed) (2003) "Working
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448
Finlayson L and Marsh A (1998), Lone Parents on the Margins
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449
Thurley D (ed) (2003) "Working to target: Can policies deliver
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450
Evans M, Eyre J, Millar J and Sarre S (2003), New Deal for
Lone Parents: Second Synthesis Report of the National Evaluation.
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451
House of Commons Work and Pensions Committee (2002), "One"
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452
McKay S (2003), Working Families Tax Credit in 2001, DWP
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453
Vegeris S and Perry J (2003), op cit. Back
454
Sutherland H (2002), Poverty, One Parent Families and Labour
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455
The simulation here excludes full-time students, those in receipt
of disability benefits for themselves and their children and those
with children under 3. Back
456
Millar J, in Thurley D ed. (2003), Working to target: Can policies
deliver paid work for seven in 10 lone parents? London: One Parent
Families. Back
457
Less of C et al (2001), New Deal for Lone Parents Evaluation:
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458
Green H, et al (2000), First Effects of ONE Part One:
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459
Evans M, McKnight A and Namazie C (2002), New Deal for Lone
Parents: First Synthesis Report of the National Evaluation,
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460
New Deal for Lone Parents Guide. Chapter 7. Back
461
DfES, DTI. HMT and DWP (2003), 21 Century Skills. Realising
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462
Bradshaw J et al (1996), Policy and the Employment of Lone Parents
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463
"Ofsted shows the `childcare gap' is closing." Press
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464
House of Commons Work and Pensions Committee, Childcare for
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HC 564-1, Page 15. Back
465
DETR Index of multiple deprivation. Back
466
Lessof et al (2001) op cit. Back
467
One Parent Families' Members Survey, March 2003. In all, 812
lone parents responded to the survey out of 3,053 questionnaires
issued. The profile of our survey respondents is consistent with
the lone-parent profile derived from major national Government
surveys of lone parents, such as the Families and Children Study
(FACS) or the Labour Force Survey. Back
468
Treasury Committee, Inland Revenue Matters. Tenth Report,
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469
HM Treasury and Inland Revenue (2002), The Child and Working
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470
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471
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472
HM Treasury (2002), 2002 Spending Review. New Public Spending
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473
DWP (2003), Standard Local Housing Allowance. Memorandum for
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474
Gregg P and Harkness S (2003), op cit. Back
475
HM Treasury (2002), The Child and Working Tax Credits. The Modernisation
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476
Adelman L, Middleton S and Ashworth K (2003) Britain's Poorest
Children: Severe and persistent poverty and social exclusion,
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477
FACS is a large survey of low to moderate income families carried
out for the Department for Work and Pensions, Four thousand families
were interviewed in two waves covering the years 1999 and 2000.
FACS includes analysis of the effectiveness of work incentive
measures and policies to raise living standards. Drawing on FACS
data, we constructed a "Lumpy Index" showing the extent
to which children in low-income families are deprived of items
they needed but could not afford-needs which can only be met by
a lump sum payment. Back
478
This compares to the amount to be saved in 2003-04 through tackling
tax avoidance and fraud-£425 million; and a little more than
that committed to the new Child Trust Fund in Budget 2003-£350
million. See HM Treasury (2003) Budget 2003-Building a Britain
of economic strength and social justice, HC 500, London: The Stationery
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479
Marsh and Perry (2003) Family change 1999 to 2001, DWP
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480
CSA (2003) Child Support Agency Quarterly Summary Statistics,
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481
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482
Marsh and Perry (2003) op cit. Back
483
HC Hansard, Written Answers, 17 July 2003, Col 520W. Back
484
House of Lords Hansard. 19 February. Column 1218. Back
485
HM Treasury (2002), 2002 Spending Review. New Public Spending
Plans 2003-06, London: HM Treasury. Back
486
CSA (2003) Annual Report and Accounts, 16 July 2003, London:
The Stationery Office. Back
487
Andrew Smith, 10 September 2003, oral evidence to the Work and
Pensions Committee. Back
488
ONS (2002) Living in Britain: results from the 2001 GHS, London:
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489
Labour Force Survey, Spring 2002, supplied to One Parent Families. Back
490
Vergeris S and Perry J (2003) Families and children 2001: living
standards and the children, London: DWP. Back
491
Sutherland H (2002) One parent families, poverty and labour policy,
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492
Sutherland H (2002) One parent families, poverty and labour policy,
op cit, p 8. Back
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