Promoting social inclusion in the labour market

Policy guides

Child Poverty

There are 3.6 million children living in relative income poverty, after housing costs, in the UK (Source: 2010–11 Households Below Average Income). This is equivalent to 27% of children. Relative income poverty is the usual measure of poverty and occurs where a household’s income is below 60% of the average (median) income in the UK (adjusted for family size and other characteristics).

The Institute for Fiscal Studies projects that on this measure child poverty will rise in the coming years, with an expected 300,000 more children living in poverty by 2015-16. By 2020 child poverty is expected to reach 4.2 million.

However, the Coalition government has reaffirmed the UK’s commitment found in the Child Poverty Act 2010 to end child poverty by 2020. They argue that the focus on a relative income measure of poverty led the previous government to overly concentrate on raising income as a means to prevent poverty. The current government argues that this was unnecessarily expensive and did not focus on the causes of poverty. The government’s White Paper, A new approach to child poverty: tackling the causes of disadvantage and transforming families’ lives sets out the government’s plan to tackle child poverty by:

  •  Reinforcing work as a route out of poverty
  • Tackling debt
  • Strengthening families
  • Early intervention
  • Tackling educational failure
  • Tackling poor health
  • Shaping services to address local needs
  • Replacing the Child Poverty Commission with a new Social Mobility and Child Poverty Commission

 Background

Tackling child poverty

In the eighties and nineties, the UK was ranked as having one of the highest rates of child poverty amongst OECD countries. After housing costs 4.3 million children were in poverty by 1999, or 33% of children.
Tony Blair announced in March 1999 a commitment to eradicate child poverty in the UK by 2020, and to halve it by 2010.

While substantial progress was made in the following years, with 900,000 children lifted out of relative poverty between 1998-9 and 2010-11, the target to halve child poverty was ultimately missed. Many credit the progress over the decade to a combination of measures to support parents (and particularly lone parents) in to work, through the New Deal programmes and increased financial support paid to families with children. The benefits and Tax Credit entitlements for low income families with children rose faster than inflation in at least eight of the 13 years from 1997 to 2010.

Debate on measurements and targets for reducing child poverty

Child poverty can be measured in four main ways:

  • In relative terms – how much income do families have in relation to the income of other families in society, and by extension how able are they to fully participate in activities seen to be normal by society? This is the main measurement of child poverty within the Child Poverty Act 2010, and poverty is set at 60% below average income.
  • In absolute terms - does a family’s income supply them with the means for subsistence? Absolute poverty has in the past been measured at 60% below the median income in a particular year, not adjusted for inflation.
  • In material terms – can and do families access the material goods and services that are considered essential to participating fully in society? This can be measured by surveying families, and is often combined with a measure of relative income poverty.
  • In terms of social mobility – this is harder to capture in real time (i.e. while children experience it) but refers to their future opportunities – and specifically that a parent’s income should not determine their children’s outcomes in later life. This measurement is central to the Coalition government’s approach and focuses on long-term outcomes to ensure that poverty is not intergenerational.

Child Poverty Act 2010

In September 2008, the Labour government promised to enshrine this target in legislation. This resulted in the Child Poverty Act 2010 that received Royal Assent on the 25 March. The legislation established four targets for 2020 to:

  •  Reduce the proportion of children who live in relative poverty (with incomes less than 60% of the median income) to less than 10%
  • Reduce the proportion of children living in material deprivation with a low income (a measure that captures both access to goods and services, and low income) to less than 5
  • Reduce the proportion of children experiencing long periods of relative poverty
  • Reduce the proportion of children living below an income threshold fixed in real terms (often called “absolute poverty”) to less than 5%

The Act also requires the Westminster government to publish a regular UK child poverty strategy, with a similar requirement on Scottish and Northern Irish Ministers. The Act established a Child Poverty Commission to advise the government and requires the UK government to publish annual progress reports. New duties were also given to local authorities and other ‘delivery partners’ in England to work in partnership to tackle child poverty.

The Coalition Government’s approach

The Coalition government argued that Labour too narrowly focused on raising income as a means to prevent poverty. The current government instead defines socio-economic disadvantage, as where ‘children lack parental resources and/or opportunities to participate in meaningful activities, services and relationships, and such experiences during childhood - especially over persistent periods of time - negatively affect children’s wellbeing, development and future life chances’.

More than limiting child poverty per se, the government is focusing on promoting social mobility through its policies. In Opening Doors, Breaking Barriers: A strategy for social mobility the Coalition government argues that it aims to ensure everyone in society is able to succeed no matter what background they are from. Poverty in childhood is acknowledged as a central indicator of later life opportunities. The report argues that in the UK parent’s income is a particularly strong indicator of children’s later income than amongst other OECD countries.

Some have argued that eradicating poverty as defined in the Child Poverty Act is impossible, and therefore the target to do so should be abandoned. Most notably, Frank Field’s Poverty and Life Chances review, an independent review on child poverty that has shaped the Coalition government’s thinking about policy, advances this argument. Frank Field MP proposes that the government instead should focus on high quality integrated services to help support children’s development especially during the first five years of life.

Further information

Indicators

These indicators demonstrate how the government will monitor progress of its national strategy towards the long-term goal of eradicating child poverty by 2020.

Family resources

These measurements of child poverty are set out in the Child Poverty Act 2010:

  • The proportion of households with relative low income
  • The proportion with combined low income and material deprivation
  • The proportion with absolute low income
  • The proportion facing persistent poverty

In addition to these, the Coalition government has added a measurement of:

  • The proportion of households with very low income and material deprivation

Family circumstances

Measurements of poverty concerning family circumstances, within the government’s paper A new approach to child poverty: tackling the causes of disadvantage and transforming families’ lives include:

  • Parental employment: proportion of children living in workless households
  • The proportion of children living in families where at least one person works yet still remain in relative low income
  • Successful transition of young adults (aged 18-24): percentage in part-time or full-time education or training and percentage of NEETs

Children’s life chances

In Frank Field’s independent review, he proposed that the government consider children’s life chances in any child poverty indicator. These indicators focus on a range of factors predictive of children’s future incomes, and likelihood of social mobility. The indicators include:

  • Low birth weight
  • Child development: school readiness of children aged up to 5
  • School and further education attainment: Attainment gaps between children receiving free school meals and those who do not at the following levels: Key Stage 2 English and Maths, Basics at Key Stage 4, Age 19 in achieving Level 3 through 2 A Levels or other A Level equivalent qualifications
  • Progression to higher education at age 19 for those who received free school meals and those who did not when they were aged 15
  • Teenage pregnancies: for 15 to 17 year-old girls per 1000
  • Young offending: aged 10 to 17 receiving their first reprimand, warning or conviction
  • Family structures: proportion living in relative poverty by household type (married/ civil partnership couples, cohabiting and lone parents)

Government’s approach to child poverty

The government’s approach is based on the following…

Reinforcing work as being a route out of poverty

The risk of being in relative poverty for workless households is 59% but there is only an 8% risk in households where both adults work. Also, 65% of those who move into work move out of poverty. The government is planning to reform the benefits system to improve the incentive to work (see policy guide on Universal Credit), and to offer tailored support to address particular barriers faced by the workless.

Tackling debt

The government is aiming to tackle over-indebtedness as those in the lowest income band are twice as likely to have structural arrears (over three months of being behind on bills/payment). It is hoped financial capability will be promoted through a money advice service, ensuring financial products on offer are easier to understand and compare and to maintain debt advice from the Citizen’s Advice Bureau.

Strengthening families

The government feels that supporting positive physical and learning home environments will mean that children have the best chance of a positive future. The government wants to offer support to whole families which is not only financial but focuses on promoting good parenting and preventing family breakdown. The government is has also committed to supporting 120,000 families with multiple problems.

Early intervention

Early or ‘Foundation Years’ have been established as being of equal importance to primary and secondary school years. The government is maintaining Surestart funding, investing in more home visitors and free early education for the most disadvantaged two year olds.

Tackling educational failure

The White Paper, The Importance of Teaching, depicts schools as engines of social mobility and sets out the Academy programme and introduces Free Schools. The Pupil Premium is intended to provide additional funding for the most disadvantaged pupils.

Tackling poor health

The government aims to promote physical and mental health and reduce health inequalities through the Health and Social Care Bill, to develop partnerships between primary care and local government. A health premium will incentivise local government and communities to reduce health inequalities. The government is investing in 4,200 health visitors.

Shaping services to address local needs

The government is focusing on Localism, or empowering communities to shape services appropriate to local needs. Local authorities can access a Core Offer of sector-led support including a Child Poverty Needs Assessment toolkit, the Child Poverty Community of Practice and so on. The government is also reforming funding streams for early, sustained, decentralised and targeted, for example, through Community Budgets.

Social Mobility and Child Poverty Commission

The government has set up a Social Mobility and Child Poverty Commission to replace the Child Poverty Commission. The new commission will monitor the government’s accountability for achieving goals to reduce child poverty and will have less of an advisory role than the Child Poverty Commission had.

Recent developments (June 2012)

Child poverty falls as government calls for new measures

Households Below Average Income (HBAI) statistics
published in June 2012 show that poverty has fallen across the population, and particularly among children. In 2010–11, just over one quarter of children in the UK (3.6 million) lived in households in poverty after housing costs had been deducted, a fall of 200,000 children (two percentage points) on the previous year. These statistics came on the day that the government announced plans to move away from income measures of poverty, with a greater emphasis on work and family behavioural factors. While welcoming a multi-faceted approach to capturing child poverty, Inclusion believes new indicators should sit alongside current measures rather than replacing them.

These statistics show that 27% of children live in households in poverty – that is, with incomes below 60% of the national median – after housing costs have been deducted. Inclusion regards ‘after housing costs’ measures of poverty as better than those that are taken before housing costs have been deducted, as they reflect standards of living more accurately. The measure including housing costs shows that 2.3 million children (18%) were living in poverty in 2010–11, 300,000 fewer than the previous year.

The HBAI figures show that interim targets to halve child poverty by 2010, enshrined in law by the previous Labour government, have been missed. Before housing costs, child poverty fell by 900,000, or just over a quarter, over a decade. An increase in housing costs over the period in question means that child poverty after housing costs have been deducted saw a smaller decease, falling by 600,000, or 14%.

A decrease in child poverty is nevertheless good news and reflects positively on the range of initiatives designed to tackle it, including an attempt to raise lone parent employment rates from 45% to a target of 70% – the rate reached 57.6% under Labour and is 57.8% now. However, an observed fall in child poverty must be qualified by the fact that national median income has itself fallen over the past year, effectively lowering the poverty line.

Although children in workless households are much more likely to be poor, children in households with at least one working adult account for the majority (three fifths) of children in poverty. This is unchanged on the previous year. The current approach to tackling child poverty centres on work, with the introduction of Universal Credit, intended to strengthen incentives to work and lift many working families out of poverty. Inclusion has always argued that work is an important part of tackling child poverty and is committed to ensuring that the welfare and welfare-to-work systems provide parents with appropriate work incentives and opportunities. However, weak growth forecasts for coming years suggest that opportunities to work, or work more, may be hard to come by for many poor families. The government’s approach to tackling child poverty must not lose sight of this.

In the wake of these statistics, the government has announced plans to revisit the way poverty is measured. Iain Duncan Smith, the Work and Pensions Secretary, has called for ‘better’ measures that ‘include income but do more to reflect the reality of child poverty in the UK today’. He is also to publish a green paper looking at a range of new non-income indicators of poverty. The government also announced that they will revise the target to eradicate child poverty by 2020.

Inclusion agrees that child poverty is about a lot more than money and must be captured via a range of indicators. For this reason, Inclusion’s free Child Poverty Toolkit details indicators of health outcomes, educational attainment, access to resources and services and behaviours that damage life chances, including indicators in the government’s Child Poverty Strategy, for every local authority. This being said, Inclusion regards relative low-income measures, after housing costs have been deducted, as the best single measure of child poverty and the effectiveness of initiatives intended to tackle it. New indicators will be helpful for understanding child poverty and tackling its causes, but should not replace current measures.

Further information

See Inclusion’s Child Poverty Toolkit, an interactive and up-to-date tool uses charts, tables and text to describe recent developments linked to child poverty at a local level. The toolkit provides information on the causes and effects of poverty including benefit outcomes, health outcomes, educational achievement and access to resources and services. http://www.cesi.org.uk/statistics/tools

 Commentary

Inclusion

Inclusion argues that the Field Review was right to identify formative years of a child’s life as critical to tackling child poverty and that the Life Chances approach offers a more rounded approach to measuring poverty. However, we believe that there was an implicit marginalisation of income as a poverty measure in the review, which is problematic. The Child Poverty Act target was to reduce the proportion of children in relative income poverty to 10%, which is stretching but achievable (and has been achieved by many advanced economies).
Financial investment through benefits and tax credits is necessary to tackle child poverty and can lead to longer term savings. Inclusion suggests an alternative definition of socio-economic disadvantage than that given by the government, which, while not relying solely on income, offers more tangible indicators that are measurable and enable international comparison. For Inclusion, parental participation in the labour market and household income most significantly influences a child’s life chances.

Joseph Rowntree Foundation

The Joseph Rowntree Foundation (JRF) found that the Coalition Government’s policies will increase relative poverty among children by 200,000 in both 2015-16 and 2020-21. In isolation, Universal Credit would reduce relative poverty by 450,000 children, JRF found, but this will be ‘more than offset’ by other changes to taxes and state benefits made by the government. JRF conclude that it is impossible to eradicate child poverty, as it is defined in the Child Poverty Act 2010, through current government policy. JRF argues that to eradicate child poverty there would need to be significant changes to the labour market and welfare to work policy, as well as redistribution by the tax and benefit system to an extent that has never occurred in the UK.

Read about the JRF position

Child Poverty Action Group

The Child Poverty Action Group (CPAG) argues that the child poverty approach pursued between 1998 and 2010 made a significant and long-lasting difference to families with children. It reduced child poverty on a scale and at a pace unmatched by any other industrial nation during the period. However, they are concerned that changes brought about by the Coalition government may reverse this change. Rather than celebrating progress up to now, debate has centred on ‘assertions that are obscuring, rather than revealing, the fundamental truths about child poverty’. The most recent CPAG report argues against the following standpoints:

  • That income should not be the measure of poverty
  • That we should measure absolute poverty instead of relative poverty
  • That we should scrap child poverty targets as unattainable
  • That strategy to tackle poverty must focus on services as opposed to raising income

Read about CPAG's position

Barnado's

Barnado’s believes that Frank Field’s recommendation for a significant shift away from raising income levels to investment in Foundation Years services, as an ‘alternative’ strategy to alleviate child poverty; will turn back progress to the 2020 targets. Barnado’s argues that a more multi-dimensional approach to child poverty is necessary as set out in the Child Poverty Act 2010. Financial support alongside early intervention will ensure that families benefit fully from any intervention offered, Barnado’s claims. For Barnado’s it is problematic that the new Commission does not have an advisory role, which contravenes the legal requirement as set out in the Child Poverty Act 2010.

Read about the Barnado's position

Save the Children

Save the Children argues that the government should not be drawn into the debate to focus on life chances interventions instead of families’ incomes. Save the Children states that both are important: ‘Long-term outcomes for children are important, but so is the everyday lived experience of poverty’. The relative measure of poverty enables us to understand whether families can afford to access the full range of opportunities presented by society. According to Save the Children, correlations between living in low income households and poor outcomes for children are strong, although there needs to be a better understanding of the impact of income on children’s life chances.

Read about Save the Children's position

4 Children: May 2012 Child Poverty Report

4 Children find that most English councils are failing to engage with their legal or moral responsibilities to reduce and eventually eradicate child poverty. Only 75 councils have a child poverty strategy in place out of 152 councils. In the country’s ten most deprived boroughs, only six councils have a full child poverty strategy. 4 Children also find strong regional variation in councils’ engagement with child poverty. 4 Children concludes that national government and the Local Government Association need to promote the sharing of best practice to help worst performing councils learn from the best. Successful regions also need to work with regions lagging behind to develop strategies, 4 Children argues.

Read about 4 Children's position 

Centre for Social Justice

The Centre for Social Justice argues that current measurements of child poverty are crude and flawed. It claims that a focus on income only considers a symptom of poverty and not the cause of poverty. The Centre for Social Justice argues that true indications of poverty are family breakdown, addiction, poor educational attainment and debt, and it is these that the government must focus on. The relative poverty measure is considered to be arbitrary as in a free society income differences are inevitable, so ‘lofty promises’ to eliminate child poverty by 2020 are ‘practically unachievable’.

Read the Centre for Social Justice report

Policy Exchange

The Policy Exchange welcomed Frank Field’s review for making a clear case for creating an alternative strategy to measure and tackle child poverty. The Policy Exchange has argued that the government’s strategy does not go far enough and that the government should have:

  • Replaced, rather than complemented, the existing income-based poverty targets with their new wider measures
  • Included longer-term measures of success alongside its focus on the early years
  • Placed a firmer emphasis on personal responsibility and the role of parents in providing a working role model for their children

Read the Policy Exchange report