Prospects for meeting the 2010-11
55. The measures announced in the 2007 Pre-Budget
Report are expected by the Government to lift 100,000 children
out of poverty. Mr Chote confirmed to us that this meant that
the Government would have to reduce child poverty by a further
700,000 to meet its interim target of halving child poverty by
pointed out that the rate of progress to be achieved by the measures
in the 2007 Pre-Budget Report "will mean we will not succeed
in halving child poverty until many years after the target date".
Barnardo's also expressed disappointment that the proposed increases
in tax credits were less than 10% of the level of investment required
if the Government was to meet the 2010-11 target and considered
that "the minimal increases in tax credits" announced
in the 2007 Pre-Budget Report made it "virtually impossible
that the Government will be able" to meet the 2010-11 target
56. Following the 2007 Budget and the measures announced
at that time, the IFS had calculated that the Government would
need to spend an additional £3.8 billion a year in order
to meet the 2010-11 child poverty target, assuming that additional
expenditure was targeted on the most effective measures, principally
increases in the child element of child tax credit.
Mr Chote acknowledged that the likely annual cost of meeting that
target had fallen as a consequence of the measures in the 2007
Pre-Budget Report, although he did not think that the fall was
equivalent to the total annual cost of those measures£600
millionbecause the new expenditure was not necessarily
the best use of resources in the context of meeting the 2010-11
57. The exact extent of progress towards child poverty
targets has generally been considered to be linked to the progress
in raising the proportion of households with adults in work. However,
shortly before the 2007 Pre-Budget Report and Comprehensive Spending
Review, the Institute of Public Policy Research (IPPR) announced
a finding that, while child poverty among workless households
had fallen over the last decade, it had risen amongst working
Chote believed that the rise in child poverty amongst working
households could be explained by the use of a relative income
measure to assess child poverty:
The increase in the proportion would presumably
be that the growth rate of incomes at that level of the income
distribution has been growing less quickly than in the median.
You are measuring how far people are falling behind the middle.
The success in terms of how people in work towards the bottom
of the income distribution are doing relative to the median is
not only a function of how much incomes are right at the bottom
but what the target is and effectively are they having to run
to stand still.
Dr Weale expanded upon possible reasons for this:
I think we have had an element of downward pressure
on wages at the low end of the distribution from a combination
of international trade competition from low wage economies and
also probably from migration. There are also questions of how
full-time some of the people who are working are actually working.
Indeed, there have to be questions about how many hours a week
they are actually working. We have seen a general widening of
the income distribution, partly at the top but also downward pressure
at the lower part of the distribution and that does have implications
for people who work..
58. Treasury officials acknowledged that, because
the child poverty target was based on relative income, it was
very sensitive to changes in income in the economy as a whole
and to changes in employment rates.
They referred to possible reasons why child poverty amongst working
households could have risen and agreed that one explanation could
be that the working adult in some lower income families might
only be employed part-time. The Chancellor of the Exchequer told
us that he was aware of the IPPR's findings and had already asked
his officials to make contact with IPPR to discuss their methodology
59. When the Government first announced its intention
to introduce Delivery Agreements, it stated that Public Service
be supported by robust plans for
delivery at the outset, to ensure clear accountability throughout
the delivery chain and a coherent balance of levers and drivers
to support the achievement of outcomes.
We have previously referred to our recommendations
that the final form of the child poverty target for the 2007 Comprehensive
Spending Review should be accompanied by a new statement of strategy
and a clear indication of how resources would be deployed on particular
measures. In written
evidence, the Child Poverty Action Group voiced disappointment
that the Government had failed to "state alongside the CSR
how it intends to meet the 2010-11 target to halve the number
of children in poverty and where the resources will come from".
60. In response to the suggestion that the Comprehensive
Spending Review did not appear to contain the provisions necessary
in order to meet the 2010-11 target or outline the Government's
strategy as to how the target would be achieved, the Chancellor
of the Exchequer explained that before 2010 the Government still
had two Budgets and two Pre-Budget Reports to move towards the
officials told us:
The fact is that because our target on child
poverty is based on relative income it is very sensitive to changes
in income in the economy as a whole and to changes in employment
rates. Therefore, we tend to look at this from each PBR to Budget
to PBR and make incremental changes rather than make one big change.
61. Both the Chancellor of the Exchequer and Chief
Secretary spoke of the need also to look at wider Government initiatives
to tackle child poverty. The Chancellor of the Exchequer said
that meeting the child poverty targets would depend upon a combination
of spending money and helping people into work.
The Chief Secretary spoke of relevant initiatives such as extending
New Deal Plus for lone parents, as well as the resources that
"the CSR makes available for skills and for adult learning".
62. The Government's emphasis on longer-term broader
measures to tackle child poverty, including increasing the employment
rate, particularly amongst lone parents, and improving skills
levels, combined with the fact that it has not earmarked resources
to meet the 2010-11 target, has led to speculation that the Government
may be shifting its focus from the 2010-11 target to the 2020
target to eradicate child poverty.
Mr Chote outlined the possible trade-off in that the 2010-11 target
could put pressure on the Government to go down the quickest cost-effective
route of getting there, which would be to increase transfer payments,
whereas focusing on the 2020 target might lead the Government
to prioritise investment in longer term social investments but
potentially at the cost of making it more likely that the 2010
target would be missed.
63. The Chancellor of the Exchequer assured us that
the Government remained committed to meeting the 2010 target,
and rejected the suggestion that the target was something that
might need to be re-examined.
However, the Chief Secretary did say he would not see it as a
huge failure if the Government only got 85% or 95% towards meeting
its 2010 child poverty target because it would still mean the
Government would have made substantial progress towards reducing
64. The Comprehensive Spending Review is not accompanied
by a clear explanation of the linkage between the Government's
target to halve child poverty by 2010-11 and the proposed deployment
of resources to meet that target. We are concerned that the Government
may have drawn back from a whole-hearted commitment to meeting
this target. A failure to meet that target would represent a conscious
decision to leave hundreds of thousands of children in poverty
for longer than is necessary or desirable. While we accept that
there may be a long-run trade-off between meeting the 2010-11
target and longer term ambitions to increase employment, the linkage
between child poverty and working households is by no means clear
cut. We consider that the Government must either initiate a public
debate on that trade-off, or rededicate itself to meeting the
2010-11 target, making clear at the earliest opportunity available
both that the necessary resources are available within the Comprehensive
Spending Review settlement and that the Government is committed
to deploying those resources.