ASSESSING THE GOVERNMENT’S RECORD ON CHILD POVERTY

The number of poor children has fallen and the living standards of the vast majority of children have risen since the Labour government took office, according to research by Mike Brewer and Alissa Goodman, published in the June 2003 issue of the Economic Journal. Yet reductions in child poverty have fallen well short of expectations, in part because the government’s preferred measure is a relative one. What’s more, children in the poorest households are now further from escaping poverty than they were in 1997.

The Labour government put reducing child poverty at the heart of the political agenda in its first term in office. Official data on child poverty now exist for the whole of Labour’s first term. They show that the number of children in poverty in Britain fell from 4.4 million in 1996/7 to 3.9 million in 2000/1, meaning that 31% of children lived in poverty in 2000/1. Most commentators had predicted that child poverty would fall much more than this.

Previous predictions were too optimistic because they largely did not take into account the fact that the government’s target measure of child poverty is a relative one. This means that whether a child is considered poor on the government’s definition depends not only on the income of the household in which it lives but also the incomes of the whole population.

As household incomes generally increased rapidly in the late 1990s, this made child poverty much more difficult to reduce. If the government had fixed the poverty line at its level in 1996, it would have been able to claim very large reductions in child poverty, of around 1.2 million in its first term.

Although the researchers do not track individual households over time, they find that, on average, the living standards of the vast majority of children (measured by their parents’ income) have improved under Labour. This growth in living standards was greatest for those who were just below the poverty line in 1996/7.

Yet children in the households with the lowest incomes experienced the slowest growth in living standards. According to government surveys, 1.1 million children live in households with less than 40% of the national median, and 4 out of every 10 of these children live in households that do not receive any of the main means-tested benefits.

These children are now further away from the poverty line than they were in 1997. Indeed, the total poverty gap, which adds up the total amount of income by which all families fall short of the poverty line, has increased under Labour even though the number of poor children has fallen.

What is not yet clear, though, is whether these very poor children are genuinely very poor and missing out on state financial assistance, whether they live in households whose incomes are very low temporarily, or whether their parents’ incomes are being measured incorrectly by government surveys. The appropriate policy response to these three alternatives is very different.

But whichever of these is the reason, the authors predict that the methodology currently used in official poverty statistics will limit the government’s ability to show large declines in child poverty, and will make it very unlikely that child poverty could ever be abolished on the government’s currently favoured definition.

ENDS

Notes for Editors: ‘What Really Happened to Child Poverty in the UK under Labour’s First Term?’ by Mike Brewer and Alissa Goodman is published in the June 2003 issue of the Economic Journal.

The authors are at the Institute for Fiscal Studies (IFS).

For Further Information: contact Mike Brewer or Alissa Goodman on 020-7291-4800 (fax: 020-7323-4780; emails: alissa_g@ifs.org.ukor mike_b@ifs.org.uk); or RES Media Consultant Romesh Vaitilingam on 0117-983-9770 or 07768-661095 (email: romesh@compuserve.com).