Madeleine Davies

All about the money? (Child poverty blog 2)

In Uncategorized on September 24, 2012 at 5:20 pm

“The previous Government’s focus on narrow income targets meant they poured resources into short-term fixes to the symptoms of poverty instead of focusing on the causes. We plan to tackle head-on the causes of poverty which underpin low achievement, aspiration and opportunity across generations. Our radical programme of reform to deliver social justice will focus on combating worklessness and educational failure and preventing family and relationship breakdown with the aim of supporting the most disadvantaged groups struggling at the bottom of society.”

A new approach to child poverty, Department for Work and Pensions & Department for Education, 2011

“There is no doubt that there is a very close link between the unprecedented and (nearly) sustained above-inflation increases in financial support for families with children over the past decade, and the unprecedented and (nearly) sustained fall in child poverty.”

Ending child poverty by 2020: progress made and lessons learned; CPAG June 2012

“There were signs that these children worried about asking for even the smallest amounts of money such as the 50p or a £1 that can be charged for a non-school-uniform day.”

The impact of poverty on young children’s experience of school; Goretti Horgan, JRF/Save the Children, 2007

If researching this blog has taught me anything, it’s that I’ll be very suspicious of anyone who claims to know precisely what causes child poverty.

One of the most thorny issues is that of money. There are lots of associations and links between a lack of money and a whole host of outcomes for children, but proving causation is a lot more complicated.

When exploring the persistence of poverty across generations for the Joseph Rowntree Foundation in 2006, Jo Blanden and Steve Gibbons of LSE asked whether a lack of money in itself left to poor outcomes in adulthood or whether poverty actually pointed towards other sorts of disadvantage – poor parental education, lack of employment in the family and family type (for example, growing up in a single parent household). They concluded that: “Income poverty goes hand in hand with numerous other forms of deprivation, some of which are consequences of the lack of resources in the household and others that lead to poverty in themselves”.

By comparing people who were teenagers in the 1970s with those who were teenagers in the 1980s they found “a large increase” in the link between being poor as a teenager and being poor as an adult. So, while in the 1970s, the link could be explained by “background factors” such as low-educated and workless parents, by the 1980s poverty was playing a “direct role”. Poor teenagers in the 1980s were at a higher risk of adult poverty than non-poor teenagers from similar family backgrounds.

Although they could pin down a link to adult worklessness for the teenagers in the later cohort, they found it was harder to explain why this changed happened (changes in educational attainment were not to blame).

Importantly, however, they concluded that: “Income itself is not the main cause” and recommended a “limited role for redistribution” and that the Government rather “intervene to address the consequences of these disadvantages”.

No one factor, they decided, was the cause. But initiatives to improve skills and employment opportunities were “probably the only sensible way to tackle the problem of persistent poverty”.

This would be probably music to the current Government’s ears (see first quote above).

Hang about…

However, just two years later, Donald Hirsch in another paper for the Joseph Rowntree Foundation, this time on the costs of child poverty (PDF), concluded that: “Even where it is impossible to disentangle the effects of income poverty from other influences in a child’s life, the evidence suggests that raising income is a necessary part of a package to improve outcomes. For example, better-off children are considerably advantaged educationally by taking part in out-of-school activities. The evidence suggests that not just income constraints, but also attitudes and cultural norms prevent worse-off children from participating. However, addressing these norms without also addressing the financial constraints is likely to prove ineffective.”

And by 2011, when JRF was responding to the Government’s new child poverty strategy (PDF), it was confident that the evidence was “far clearer” and that “money does make a difference” (although there remained, it admitted, a debate about “the extent to which money matters and the routes by which the effects occur”).

They spent HOW MUCH?

The whole question of money is further complicated by the fact that the matter of causation is highly contentious and politicised.

The Right accuses the Left of simply throwing money at the problem of child poverty. The Left accuses the Right of demonising the behaviour of the poor.

Certainly, the current Government is unafraid to cross the threshold into poor households and make bold pronouncements about worklessness, marital breakdown and parental neglect.

I’ll look at this new approach in much more detail in the next blog. But first, it’s useful to look at what happened under the previous, Labour, government.

In a nutshell, a large amount of money was spent.

Financial support for a workless lone parent with one child was 20% higher in real terms in 2010 than in 1997, 36% higher for a long parent working part time on a low wage and had grown by even more for an unemployed couple with three children.

In her book “Britain’s War on Poverty”, Professor Jane Waldfogel, an American academic, contrasts the British to the American approach to tackling the problem (it’s highly complementary about us, by the way). She notes that, while the Labour government sought to incentivise work through its New Deal and the Working Tax Credit, it also increased unconditional financial support for families. You didn’t have to work to get the money.

She concludes that the reforms were successful in “making work pay” (a broadside to the claims of the current government). For example, a lone parent working 30 hours per week at the minimum wage and claiming the available benefits and tax credits would have had a net income of £163.73 per week in 1998 rising to £348.04 per week by 2008.

What an American policymaker might want to know is, is this more or less than this parent could have gained from benefits without working at all? It’s a question that Iain Duncan Smith has put at the top of the welfare reform agenda. Mike Brewer, of the Institute for Fiscal Studies, has explained that “there’s no single magic pay threshold at which everyone is better off on benefits than in work”, because of a “complex interacting web of unemployment benefit, housing benefit, council tax benefit, as well as taxes and tax credits, which different people are eligible for at different rates.” It is possible however, that the incentives in 2008 would have been poor for a lone parent with several children living in rented accommodation.

Waldfogel notes the “sharp contrast” between the New Labour approach and that taken in the United States, which during the same period, made support for children contingent on parental employment. In the UK, in addition to the expansion of child benefit, a new children’s tax credit, not conditional on work, was introduced, reaching about 80% of families, with the most generous amounts targeted at families with very small children.

As mentioned above, the  Coalition argues that this amounts to creating benefit dependency. I’ll explore this in the next blog.

But Labour’s approach wasn’t solely a matter of redistribution, despite the current government’s rhetoric. Professor Waldfogel notes that the Labour government also invested heavily in public services for children, including Sure Start, rebuilding schools and investing in public health. More on Sure Start in blog number 5.

The dominant rhetoric of the current government is that this approach didn’t work.

Its own strategy (“A new approach to Child poverty: tackling the causes of disadvantage and transforming families lives”) suggests that: “Limited social returns were delivered despite significant income transfers leaving the taxpayer with an unmanageable level of debt…Previous ministers announced that they had made progress on child poverty but actually for too many their life chances did not alter. This is because the causal problems were never addressed.”

Its an interpretation that is likely to chime with public opinion. The British Social Attitude Survey, carried out in 2008, found that 72% of people thought that child poverty had either increased or stayed the same over the previous ten years. In fact, between 1998/99 and 2005/06 the number of children in relative poverty fell by 600,000 (PDF).

It’s also an interpretation that has been very publicly challenged.

Reasons to be cheerful?

CPAG describes the Government’s line as a “wholly mistaken and potentially disastrous reading of the evidence”.

Official statistics show that between 1999 and 2012

•Absolute poverty reduced by more than half (from 3.4 million children to 1.4 million children since 1999)

•Relative poverty reduced by 1.1 million children (from 3.4 million to 2.3 million since 1999)

•Material deprivation reduced by 300,000 children (from 2.2 million to 1.9 million since 2005).

The Institute for Fiscal Studies calculated that between 1998/99 and 2010/11 the number of children living in poverty fell by 900,000, along with an additional 900,000 who have been prevented from falling into poverty during the same period.

This meant that the Government did not meet its own child poverty targets. However, CPAG reports (PDF) that a reduction on this scale “has few if any precedents, either over time or across comparable wealthy countries.” Its review of national trends, using 48 indicators (material wellbeing, child health, subjective wellbeing and mental health, education, housing, child maltreatment, children in care, childcare, crime and drugs) over the period 1997 to 2010 found that 36 had moved in the right direction, including educational attainment, housing conditions, child maltreatment and youth crime.

Professor Waldfogel, meanwhile, concluded that Britain had made “impressive” strides towards eradicating child poverty and suggested that the US had something to learn from it (absolute and relative poverty have also fallen in the States, but not as much as in the UK). For her, our experience has provided “one very clear lesson”: “Where there is a serious public intention and effort to tackle child poverty, substantial reductions can be achieved.” Redistribution has a role to play, in her analysis. Among the recommendations she made for the US were

  •  setting an appropriate level for the minimum wage
  •  ensure child tax credit reaches all poor children, regardless of whether    or not their parents are working
  • target additional benefits to families with the youngest children

However, she also highlights the success of getting parents into work. For example, lone-parent employment increased from 45% to 57% from 1997 to 2008 and the number of lone parents receiving benefits through the means-tested welfare programme for non-working families fell by more than 25% to 740,000 in the same period. CPAG estimates that about one-quarter of the fall in child poverty since 1998/99 can be linked to higher rates of employment among lone parents.

Waldfogel also highlights the success of Sure Start  in improving childhood experience and the fact that, in the wake of more generous benefits, families with children spent more on child-related items, such as chldren’s clothing, and books and toys, while reducing their spending on alcohol and tobacco.

More than money

Nevertheless, there is recognition across the political spectrum that poverty is about more than money.

It was the Labour MP, Frank Field, who argued that: “the exclusive concern of the adult world about how financial poverty affects children’s life chances has prevented a more comprehensive understanding of why life’s race is already determined for most poor children before they even begin their first day at school.”

CPAG noted this year that there is “much to commend” in the government’s focus on early years education and reducing educational underperformance and worklessness: “over the longer term they would at least contribute to reducing inequality and child poverty and eventually increase social mobility.”

The JRF estimated in 2006 that it would cost a whopping £30 billion a year to eradicate child poverty by 2020 solely through government-ordered redistribution.

Although it does not advocate this, it concludes that given the savings possible, “in the long term a policy combining redistribution with the promoting of opportunities could largely pay for itself.”

In the next chapter I’ll look at the evidence for going beyond increasing the income of households to address poverty and whether the current Government’s diagnosis of the problem, set out in the quote at the start of this post, is the right one.

  1. […] There is plenty to take issue with here. The Labour Government did focus on income, but it also invested huge amounts in public services such as the Sure Start centres, in recognition of the fact that income alone wouldn’t solve the problems faced by disadvantaged children (see Blog 2.). […]

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