The struggle against child poverty: an analysis of Labour's legacy

Last week saw the publication of the UK’s child poverty statistics – significant for indicating the performance of Labour in meeting their target to ‘half child poverty in Britain by 2010’. Nick Pearce, Director of the IPPR provides his analysis of the data and suggestions of the way forward. 

One of the most important moral tests of any government is how it treats disadvantaged and vulnerable children. Last Thursday morning saw the annual publication of the child poverty statistics. This year’s set of statistics was especially important because it covered the year 2010/11, so it enabled us to come to a final judgment on the Labour government’s record on child poverty.

In advance of the statistics, battle was properly joined on whether Labour’s child poverty targets, enshrined in the Child Poverty Act 2010, were the right ones, and in particular, whether measuring poor households’ incomes, relative to median incomes, is the best way of thinking about poverty or not. The Centre for Social Justice  became the latest in a long line of conservative thinktanks to criticise the child poverty targets and Labour’s approach to meeting them; meanwhile the Child Poverty Action Group and a number of commentators issued their detailed rejoinders.

Some of the criticisms of Labour’s targets are easily dispatched. The idea that ‘the poor will always be with us’ if a relative rather than absolute measure of child poverty is adopted, rests on a confusion between the median and the mean (less charitably, you can call this a statistical ‘howler', as Polly Toynbee did last week). The relative measure of child poverty doesn’t calculate the distance from the average but from the median, so it is perfectly possible to have low levels of child poverty and still have significant levels of inequality between the middle of the income distribution and the top. (That, incidentally, is broadly why Labour was able to reduce child and pensioner poverty significantly without reducing the overall level of income inequality, measured by the Gini coefficient.) Moreover, other countries have significantly lower levels of child poverty, measured in relative terms, than we do, so empirically it is clearly possible.

Another standard criticism is that Labour didn’t achieve very much, given the resources it ploughed into tax credits, childcare and other services for poor families. True, Labour clearly missed its midpoint target to halve child poverty by 2010. But academic experts like Jane Waldfogel and Mike Brewer believe that its record was a substantial achievement nonetheless, bucking the international trend. Brewer’s provisional estimates (prior to the publication of the 2010/11 statistics) were that the number of children in poverty would have risen to around 4.3 million by 2010 had Labour not invested in substantial increases in tax credits and other measures, instead of falling from 3.4 million to 2.5 million children, or by slightly more than a quarter. As it happens, the official statistics published on Thursday showed a somewhat better picture: over the course of the Labour government, the number of children in relative child poverty fell to 2.3 million ( the unexpectedly large fall of 2 percentage points between 2009/10 and 200/11 happened in part because median incomes fell sharply, but also because Alastair Darling’s last Budget included a generous over-indexation of the Child Tax Credit).

Last year, Nick Clegg notoriously argued that this record amounted to little more than ‘poverty plus a pound’. Yet if you look at DWP figures they demonstrate a fall in child poverty across a spectrum of households, from families in severe poverty at 43 per cent of the median, to those at 100 per cent.

Cumulative distribution function of household incomes for children in 1998/99 and 2008/09 (Great Britain)

 

Lying behind Clegg’s charge, and that of the conservative think-tanks, is a more fundamental point. This is the argument that raising household incomes does nothing substantial to address the underlying causes of what makes people poor and doesn’t therefore transform children’s life chances. On this score, Alan Milburn is surely right to say that income and opportunity are not opposites but two sides of the same coin. Children who grow up in households with very little money experience significant disadvantages which impair their chances in life considerably. There is copious evidence to that effect.

Conversely, there are now more children living in poverty in households where one of the parents works than in workless households. Low income families can do all the right things – hold down jobs and raise their children as best they can – and still be poor if they can’t earn a decent living.

Number of working-age adults in households below 60% of median income after housing costs, by family work status

 

 

That isn’t to say that income is all that matters. Patently, there are plenty of families living in poverty whose problems – drug and alcohol addiction, poor basic skills, and personal debt – explain why they are poor and likely to remain so without sustained changes in their circumstances. There are also many dimensions of poverty which cannot be captured by income alone – a richer, multi-dimensional account will tell you more about the lives of children than an income measure alone. In neither instance, however, should income be written out of the script or the focus transferred solely to individual family pathologies. Individual agency and structural determinants both have an explanatory role to play.

I think there are at least two substantial criticisms that can be made of Labour’s approach. The first is that Labour lacked a properly strategic view of how to meet its child poverty ambitions: it had a 2020 target but no roadmap for getting there. This meant that at each budget, a deal was put together that usually combined child tax credit increases, earnings disregards in benefits, and boosts to child benefit. A calculation would be made as to how many children would be taken out of relative income poverty by any one combination of measures in any one year. Far less thought was given to how the long-term poverty reduction targets would be met in a consistent and strategic way.

Second, income transfers can strip people of agency in the struggle to overcome poverty. People are recipients of transfers – which matter greatly to them – but of which they are not the authors. Contrast this to the active, organised struggle for a living wage and you get the point. Although tax credits will always have an important role to play, a different form of democratic statecraft is needed in the fight against child poverty in the future – not least because otherwise, the British people will continue to believe that child poverty doesn’t exist, and if it does, it is solely about the lives of others.

The current fiscal position forces us to think afresh anyway. As the IFS has made abundantly clear, we can’t reach the 2020 target on any plausible assumptions about the labour market and the public finances. A new, more focused but also more strategic approach is needed.

As IPPR has previously argued, we should now focus on three priorities:  under-5s, building a universal childcare system, and ensuring that families who work are not in poverty. Scarce resources should now be dedicated to those goals.

A focus of this kind is strongly supported by the international evidence on poverty. As the chart below shows, countries with high rates of maternal employment, underpinned by high-quality, affordable childcare, have lower levels of child poverty.

Child poverty rates are lower in countries with higher maternal employment rates, selected OECD and EU countries, 2008

We have not currently got that balance right in this country. Following substantial rises in spending under Labour, we now commit a relatively high share of our national income on families with children. However, while this was aimed at reducing child poverty in a cost-efficient manner, the graph below suggests that – paradoxically – we are not doing as well as other countries at translating this into low child poverty.

Total spending for pre-primary and childcare as a percentage of GDP against child poverty rates

This disparity is partly explained by Britain’s relatively high levels of income inequality, single parent households, low pay and worklessness, but it also reinforces the need for a more strategic approach to supporting families with children – especially given the fiscal constraints. That means a stronger focus on childcare, the under-5s and working families – and a recognition that the struggle to eradicate child poverty will not be achieved overnight.

About the author

Nick Pearce is Director of the Institute for Public Policy Research.