Tory benefit cuts will lead to more than 2.6 million British children living in poverty by 2020, a new study has revealed.
The research by the Institute for Fiscal Studies (IFS) forecasts that another four years of David Cameron’s Government will mean the poorest households, particularly larger families and single parents, will be hardest hit.
The IFS report, funded by the Joseph Rowntree Foundation, finds that the UK’s booming jobs market has cut the number of people living below the poverty line over the last two years.
But the study says “the outlook looks less favourable for low-income households” in coming years and warns that inequality will worsen due to George Osborne’s planned cuts.
It predicts that those at the very bottom of society, in the lowest 10% of households, will see no real terms growth in their incomes over the rest of the Parliament.
One IFS projection of absolute poverty
And the impact on children will be stark, with the “absolute poverty” rate set to rise sharply from 15.1% in 2015/16 to 18.3% in 2020/21.
Families with more than three children will suffer most from the Tory government’s decision to limit child tax credit and universal credit to families with two offspring from April 2017.
Ministers insist that the two-child limits on benefits reflect voters' demands for a 'fairer' welfare system, and point out that the success of the economy has helped lift families above the breadline in recent years.
The increase in absolute child poverty rates is much larger in lone-parent families than in couple families too, mainly because they rely more on benefits and tax credits.
The impact on larger families
Labour seized on the figures, with Shadow Chancellor John McDonnell saying they should “shame” George Osborne into halting his planned cuts to welfare.
"When you read through the detail of this report the alarming figures are that by the end of this Tory government one in four children will be living in relative poverty with a rise to 2.6 million children living in absolute poverty,” he said.
"As the report clearly states, the government's planned tax and benefit changes are a major reason for these rises in relative and absolute poverty over the next 5 years. If you could take out the Tory planned regressive reforms then you would be able to take out the Tory increases in child poverty too.
"This report should shame the Chancellor, as any upsides rely more on the policies of OPEC in setting oil prices than George Osborne in boosting wages. And as this report clearly states it's Tory policies that will drive up child poverty over this parliament.
"It further proves how the Tories are holding back the aspirations of millions over the next 5 years."
The IFS report has good news, however, for pensioners, who are projected to avoid the poverty line because of the Government’s ‘triple lock’ guarantee on the state pension.
Shadow Chancellor John McDonnell
The latest official data on household income only run up to 2013–14 and the IFS has estimated what has happened since then, taking into account labour market trends and changes in tax and benefit policy.
The study finds that rising employment, as well as record low inflation, have helped increase most incomes on average in the past three years.
Most people have seen falls in the number in ‘absolute’ poverty – that is, the number falling below a fixed real poverty line.
In 2015/16 the IFS estimates there were about 400,000 fewer children, 300,000 fewer working-age adults without children, and 200,000 fewer pensioners in absolute poverty than in 2013/14.
But the planned cuts in benefits for the rest of the Parliament will begin to bite from this year.
The report adds that young adults have seen particularly strong income growth over the last two years, though this only represents a partial bounce-back following severe income losses between the 2008 recession and 2013.
Median income among those aged 22 to 30 is estimated to have increased by 10.5% between 2012/13 and 2015/16. But this comes after a huge 13% fall in incomes for this group since 2007/08.
The OECD and the European Union are organisations that still use the relative poverty measure as it is still the standard international measure. As independent policy analyst Declan Gaffney explains: "It is hard to see why the measure should be suitable for other countries but not the UK."
Iain Duncan Smith used to claim all forms of poverty, "absolute or relative", must be dealt with. In a foreword to a report from the Conservative Party Social Justice Policy Group in 2006, he wrote: "All forms of poverty – absolute and relative – must be dealt with."
Osborne and IDS insist that they are not happy with "measuring our achievement simply by how many children are moved from one side of an arbitrary line to the other." However, the Institute for Fiscal Studies' Matt Brewer concluded that the pair are wrong as "there was no cynical lifting of incomes from just below to just over an arbitrary line." He adds: "The beneficiaries from the government’s increases to tax credits or families were spread widely across the bottom half of the income distribution, and the income gains were anything but nugatory"
Osborne and IDS both sniff at the "discredited" relative poverty measure, defined as 60% of median income, as used under Labour. Their cynicism contrasts with David Cameron, who warned that "poverty is relative – and those who pretend otherwise are wrong".
Despite IDS and Osborne's promise to tackle child poverty in "workless" families, figures from the Department for Work and Pensions show that two-thirds (66%) of children growing up in poverty live in a family where at least one member works. Also 71% of children in poverty are in couple households, so poverty doesn't just hit children of single parents.
According to the Institute for Fiscal Studies, 2.7 million children will be in relative poverty by the general election, with that number soaring yet higher to 3.2 million in 2020.
The data lag means that the initial 300,000 fall in child poverty from 2010 to 2012 would have been brought about by Labour's policies. Lindsay Judge from the Child Poverty Action Group explains that it is "primarily the result of policies they inherited – most notably the over-indexation of child tax credit – from which they have subsequently retreated".
Unless the government repeals the Child Poverty Act 2010, the target of reducing child poverty to 10% remains on the statute book. And the government is on track to miss its legally binding target by a massive margin of 2 million.
There is a data lag for child poverty, so the 400,000 projected increase in the number of children in poverty won't be shown in the data until 2016.
In a Unicef study of children's material well-being, measuring how little money and essentials they have, the UK came below other advanced economies like France and Austria.