Comment: Universal child benefit may be an unaffordable luxury
The government’s most urgent goal must be to use the principles of fairness to redirect any savings generated by changing child benefit towards tackling child poverty.
By Neera Sharma
Child poverty remains endemic in British society. The Labour Government reduced child poverty by 600,000 children but the latest estimates from the IFS show that the target to halve child poverty by 2010/11 is likely to be missed by some 700,000 children which will slow down progress towards the obligation to end child poverty by 2020, enshrined in law.
Almost four million children in the UK live in poverty. Children like Jelani who when asked whether he got presents for his 14th birthday said that he received £10 from his friend but he gave this to his mother to help towards the cost of school uniforms. Although many families just do not have enough money to live on, poverty is much more than a lack of income. It means a grossly unfair reduction in a child’s life chances resulting in reduced educational attainment and employment prospects and worse physical and mental health. Ultimately child poverty means shorter lives. Baby boys born to parents with a professional job live almost seven years longer and an extra 13 years of life in good health compared with baby boys born to parents with a low-skilled job.
Poverty damages the life chances of far too many children and is costly to society as a whole. The Joseph Rowntree Foundation estimates the annual cost to the nation of child poverty is around £25 billion. Addressing income poverty must remain a high priority for Government but it has an expensive price tag attached. In February 2009, the IFS estimated that an investment of £4.7 billion into child tax credits would enable the Government to meet its 2010 target of halving the number of children living in poverty to 1.7 million. Policy changes since this research suggest that it will now be considerably more expensive to reach this target than before.
Barnardo’s have been proposing cost effective solutions to the Government so that they can make progress towards taking more children out of poverty without spending a penny more. In 2008 we published a report with Deloitte’s showing how child tax credits could be better targeted at the poorest families. So we were pleased when in the Emergency Budget the Coalition Government announced that tax credits would be targeted more to those earning less and reducing eligibility to those earning over £40,000. As a result there would be no increase in child poverty for the next two years.
Our proposals on child benefit are based on the same principle – that money must be redistributed from those not in need to those who are. This could be funded through substantial savings that the Government would realise from reforming universal benefits. Reducing income poverty through better benefit targeting will reduce the burden of savings to be found through the spending review alone, whilst protecting welfare payments to those most in need. The savings that could be achieved through reforming universal benefits could add up to £6.5 billion a year. Our options included scrapping child benefit and using it to increase child tax credits so that poor families do not lose out, saving £5.1 billion which can then go to reduce child poverty.
We cautiously welcome the Government’s proposals to cap child benefit for families earning more than £44,000 but there is an anomaly which advantages two earner families.
We would also strongly counter any moves to make child benefit age related as Frank Field has proposed. He has suggested saving £3bn by limiting child benefit to children under 13, and there have been suggestions that it could be stopped for children aged 16 and over. Raising teenage children is expensive and a single earner in a two parent family working full time on the minimum wage with two teenage children, and after receiving every possible benefit, has to raise a family on one hundred pounds less than the amount the Joseph Rowntree Foundation claim is necessary for minimum acceptable standard of living each week.
Over half of all children are growing up in a family where someone works. Iain Duncan Smith’s proposals for a universal credit and making work pay look likely to go ahead although over a longer timescale. Such a radical reform to make welfare fit the 21st century was long overdue and tinkering around the edges has landed us with a complex, unwieldy system.
Now is the time to question whether it is right to continue to give money to better off families based on the principles of universality rather than need. It is arguably a luxury we can no longer afford. The Government has set itself the task of cutting a massive budget deficit guided by the principles of freedom, fairness and responsibility. Its most urgent goal must be to use those principles to redirect any savings generated by changing child benefit towards tackling child poverty.
Neera Sharma is assistant director of policy at children’s charity Barnardo’s.
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